Intel stock falls most since 1974 as Israel plant shutdown hits; US stake loses $12B

Intel shares fell 28.58% on Friday to $65.76. The decline followed a weaker-than-expected forecast that reflected an extended shutdown at a chip plant in Israel and continued weakness in the personal computer market.

According to CNBC, the stock was headed for its worst day since 1974 and its second-steepest decline on record. The sell-off erased about $12 billion from the value of the US government’s stake, although the investment remained profitable, the report said. It also marked a setback for chief executive Lip-Bu Tan’s turnaround effort after Intel shares had gained about 150% this year before the company’s latest earnings report. The company expects the Israel disruption alone to cost approximately $600 million in revenue over two quarters.

Intel’s forecast accounts for an explosion at an Israeli fabrication plant that killed two workers and seriously injured a third earlier in October. Tan described the incident as an “unfortunate and tragic accident” and said it caused an “extended shutdown” affecting shipments of 10-nanometre chips.

Intel’s finance chief, David Zinsner, said the lost revenue would total about $600 million over two quarters. The disruption adds to pressure from a slowing PC market, where rising costs for memory and other components are affecting demand. Global PC shipments fell 4% in the second quarter versus a year earlier, according to Counterpoint Research.

Intel forecast revenue of $15 billion to $16 billion for the current quarter, below analysts’ expectations of $17.1 billion, according to LSEG. The company also projected adjusted earnings of 25 cents per share, below analysts' 43 cents per share. Adjusted earnings exclude certain items from the company’s reported results.

“We see the PC slowdown continuing at least through the first half of next year,” Zinsner said. “We will continue making disciplined investments in capacity and working capital to increase supply and support future growth.”

DA Davidson analysts downgraded Intel to neutral from buy in a report titled “Not fixed yet.” They acknowledged industry-wide PC weakness but questioned whether the company’s valuation was justified.

The Trump administration led the US government into taking a 10% stake in Intel more than a year ago. CNBC reported that Friday’s decline reduced its value by about $12 billion without eliminating the investment’s overall gain. Nvidia’s Intel stake also fell by about $6 billion.

Tan’s recovery plan includes expanding Intel’s foundry business, which manufactures chips for other companies. Intel is producing its advanced 18A technology at high volume in Arizona, but the report said it still had no external customers for its new chips.

“We’re going to have a couple of customers ready to announce the next two quarters,” Tan said on the earnings call.