Intel Announces Delay In Development Of Next-Generation Chips, Stocks Fall

United States based chip making giant Intel disappointed investors with its announcement of delay for its next-generation chips with its shares falling as much as 18 per cent to be noted s the worst performing stock on Friday.

Intel CEO Bob Swan said in a prepared statement Thursday night as part of quarterly earnings that the company expected to incur a delay of six months in the development of the 7-nanometer chip product. Swan said that the company would be able to make the initial shipments sometime in “late 2022 or early 2023”.

7-nanometer products are already used by Advanced Micro Devices (AMD), Intel’s competitor in this segment. Its stocks rallied on Friday with an almost 17 per cent rise in its stock price by the end of the day which turned out to be the best performer in the S&P.

In comparison, share price of Intel dropped by 16 per cent by the end of the trading day, making it the weakest performing stock in the S&P 500 and the Dow indices. It was alos the weakest performer in the Nasdaq Composite index.

“Intel had manufacturing issues with the 7-nanometer transistors, so there will be a delay in the release of the chips that include those transistors,” said David Madden, market analyst at CMC Markets.

In addition to the shocking news of the delay in its latest chip development project, the company’s third quarter guidance was also much lower than the expectations of the market. Intel said that it expects to achieve sale revenues of $18.2 billion for the third quarter which would be 5 per cent lower year on year. The company also predicted third quarter earnings per share to be at $1.10, which would be lower by 22 per cent compared to the same period a year ago.

However the company comfortably beat analyst expectations for the second quarter performance.

There has been a reversing of rallying of US stocks, including that of Intel, as worries of an economic recovery of the US surfaced in recent days which have dampened investor spirits. Additionally, investors and markets are also worried about the resurgence and intensifying of the tensions between the United States and China after the US ordered the closure of the Chinese consulate in Houston and with China retaliating with order for closure of the US consulate in Chengdu.

The relationship between the US and China has been critical for Intel because of its high exposure to the Chinese market. In the past, the company has suffered because of tensions in relations between Washington and Beijing, particularly during the trade war between the two countries last year.

(Adapted from CNN.com)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s