Intel Corp. experienced a significant drop in its stock value, plunging to its largest one-day decline in over three and a half years. Analysts have voiced their concerns over the chip maker, emphasizing a weak first-quarter forecast and a troubling outlook for the company's data-center and artificial-intelligence unit.

Baird analyst Tristan Gerra highlighted the challenges faced by Intel's data-center and AI division, predicting a third consecutive year of revenue decline. Gerra's revenue forecast suggests a 14-year low for the company. He expressed doubts about the ability of Intel's accelerator chip, Gaudi, to boost data-center revenue, while also pointing out that gross margins will be affected by higher depreciation costs, including an expected U.S. Chip Act credit.

Moreover, Gerra raised broader concerns about Intel's future prospects, questioning whether top-line growth in the coming years would be sufficient to fund continued node migration. He pointed out the difficulties of ramping units from a small baseline, making it more challenging to yield at the next node. The success of Intel's revenue ramp through the Intel Foundry Service is entirely dependent on future node execution, including yield and performance.

Gerra rated Intel's stock as neutral and provided a target price of $40. He also highlighted the increasing competition from AMD and ARM, as well as a shift towards accelerated computing architectures, negatively impacting Intel's core data-center business. Gerra stated that AI would remain the spending priority in the data center for several quarters, resulting in dollars moving away from Intel's core competency.

Rosenblatt analyst Hans Mosesmann concurred with Gerra, emphasizing that Intel's sales outlook contradicts the overly optimistic messaging conveyed to the Street. Mosesmann pointed out Intel's share losses to AMD and the lack of a prominent AI growth vector, suggesting that the company is bound to face another transitional year. He has maintained a sell rating for Intel's stock, stating that his stance has not changed for many years.

However, Raymond James analyst Srini Pajjuri maintained a more positive outlook on Intel's potential in the AI segment. Pajjuri, despite acknowledging that Intel may not receive immediate recognition for its efforts in AI, expressed encouragement over the growing pipeline for Gaudi accelerators, which could generate a significant revenue contribution in the second half of 2024. Pajjuri maintained an outperform call on Intel's stock but adjusted the target price to $52 from $54.

As Intel's stock plummeted, these developments shed light on the challenges the company faces, particularly in the data-center and AI sectors, and raise questions about its ability to regain its footing amidst intensifying competition.