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(Reuters) - Intel shares fell nearly 6% in premarket trade on Friday after the chipmaker's weak revenue and profit forecast disappointed investors hoping for reassurances from new CEO Lip-Bu Tan's turnaround strategy.
Once a dominant force in the chip industry, Intel is struggling to catch up with rivals after years of missteps, battling to gain ground in AI while its largest market, China, remains locked in a trade war with the U.S.
Investors and analysts, who are counting on Tan — appointed CEO last month — to drive a turnaround, were left disappointed by the company’s weak financial forecast despite his signals of cultural change and renewed focus on core engineering.
"The clearest sense from the CEO transition is that this is going to take time," Morgan Stanley analysts said.
The Santa Clara, California-based company said it expects revenue of $11.2 billion to $12.4 billion for the June quarter, compared with analysts' average estimate of $12.82 billion, according to data compiled by LSEG.
"Intel's soft guidance reflects a world where industrial policy is replacing free trade; U.S. export restrictions and China's parallel silicon ambitions are squeezing Intel from both sides—on pricing, supply chain fluidity, and global total addressable market," said Michael Ashley Schulman, chief investment officer at Running Point Capital.
Despite chips being exempted from U.S. President Donald Trump's tariffs for now, a major hit to Intel could come from China's retaliatory tariffs on U.S. imports, with chips manufactured in the U.S. set to face levies of 85% or higher, based on the state-backed China Semiconductor Industry Association's (CSIA) notice earlier in April.
"There’s no such thing as ‘business as usual’ when your two biggest markets are weaponizing semiconductors," said Schulman.
Tariff-led volatility had pushed customers to stockpile Intel chips, boosting sales for the first quarter but weighing on the second, CFO David Zinsner said.
Intel has gained 7.2% so far this year, outperforming AI chip leader Nvidia and Advanced Micro Devices, which have each fallen nearly 20%.
Nvidia and Advanced Micro Devices are yet to report results.
Intel, however, trades at a higher 12-month forward price-to-earnings ratio of 31.37 versus 22.70 for Nvidia and 19.24 for AMD.
At least two brokerages cut price target for Intel's stock following results. Shares were last down 5.82% at $20.24 in premarket trading on Friday.
(Reporting by Kanchana Chakravarty and Arsheeya Bajwa in Bengaluru; additional reporting by Amanda Cooper in London; Editing by Nivedita Bhattacharjee)