Intel entered its third-quarter report with a split-screen recovery. Revenue rose 21% year on year to $16.5 billion, while data-center and AI revenue jumped 78% to $7.3 billion. But client computing and physical AI revenue fell 5% to $8.1 billion, underscoring the weakness in the PC business.¹

The pressure had been building through the quarter. Intel said memory shortages, driven in part by AI demand, had raised component costs and pushed PC makers to lift prices. CFO David Zinsner said the deterioration became clear late in the summer: “As we got toward the end of August, we just saw some real weakening of the market.”²

That produced a fourth-quarter forecast well below Wall Street’s expectations: Intel projected $15 billion to $16 billion in revenue, against analysts’ $17.1 billion estimate, and expected adjusted earnings of 25 cents a share rather than 43 cents. Zinsner warned that “the PC slowdown” would continue “at least through the first half of next year.”¹

Investors did not wait for that slowdown to play out. Intel shares plunged more than 20% after the report and were down about 29% in Friday trading, helping pull chip names and the Nasdaq lower. The sell-off was not solely an Intel verdict; it reflected broader unease about whether enormous AI capital spending will deliver sufficient returns.³

Intel’s management argued that the AI opportunity remains intact and promised restraint on spending. Yet the company’s own numbers captured the market’s central tension: AI is lifting demand for data-center chips while also helping make PCs more expensive. CEO Lip-Bu Tan said customers were already signaling a slowdown as “memory prices and availability” put further pressure on constrained IT budgets.⁴