AI Is Booming, So Why Is Intel's Stock Plunging? ... Intel Faces a "Cash Wall" [Weekend Money]

Third-quarter revenue and EPS beat market expectations
Investors more sensitive to cash flow than AI demand

Intel, considered one of the biggest beneficiaries of the artificial intelligence (AI) era, saw its share price plunge despite reporting third-quarter results that beat market expectations. Analysts say the market has begun to focus more on the cash flow burden of large-scale investments than on growth in its data center and foundry businesses.

Intel's third-quarter revenue was $16.51 billion, up 20.9% from a year earlier, while earnings per share came to $0.52, beating market expectations. Revenue from DCAI, which oversees the data center and AI business, surged 77.8% to $7.32 billion, and its operating margin improved to 41.5%.

The foundry business also rebounded. Third-quarter revenue was $6.7 billion, up 58% from a year earlier, and its operating margin improved by 8.6 percentage points from the previous quarter. Progress was also confirmed in the advanced Intel 3 and 18A process technologies and the EMIB packaging technology.

Park Jaehwan, an analyst at Eugene Investment & Securities, said, "The growth momentum in DCAI is continuing, with both the average selling price (ASP) and shipment volume of server CPUs rising."

However, the market was disappointed by the outlook for the fourth quarter. Intel forecast revenue of $15.5 billion, a gross margin of 38%, and earnings per share of $0.25 for the quarter, all below market expectations. Server CPU shipments are facing some disruption due to an incident at a fab in Israel, while weakness in the client business is adding to the pressure.

Cash flow put even greater pressure on the share price. Intel maintained its capital expenditure guidance of $20 billion for this year and plans to substantially increase investment next year as well. Eugene Investment & Securities, meanwhile, expects free cash flow (FCF) to remain negative in 2027.

Park said, "As market doubts about AI demand and the return on investment (ROI) from capital expenditures grow, investors have become extremely sensitive to cash flow and the capacity to raise capital."

Intel's share price fell more than 20% after the earnings announcement. This signals that the market is no longer looking only at AI growth rates; it has begun to scrutinize whether the investment poured into that growth will translate into actual cash.

However, the company's long-term growth potential has not been derailed. Demand for server CPUs remains solid, potentially supporting continued growth in data center shipments, while EMIB is also expected to expand its customer base to include Google, Amazon, and Microsoft.

Park said, "The long-term growth trajectory, supported by strong DCAI performance and a foundry turnaround, remains intact." However, he noted that a catalyst to revive subdued investor sentiment toward AI hardware investment would be needed for the share price to regain momentum.

This content was produced with the assistance of AI translation services.