In a disappointing turn of events, Intel's stock fell more than 5% in after-hours trade on Thursday following the company's fourth quarter results announcement. While the company reported fourth quarter earnings that surpassed estimates, its outlook for the current quarter fell below expectations, leading to the market reaction.

For the first quarter, Intel expects adjusted earnings per share to reach $0.13, much lower than the $0.34 forecasted by analysts. Additionally, revenue for Q1 is projected to range between $12.2 billion and $13.2 billion, falling short of the anticipated $14.2 billion.

Although Intel's fourth quarter performance was solid, with adjusted earnings per share of $0.54 (above the expected $0.44) and revenue of $15.4 billion (surpassing the estimated $15.2 billion), its Data Center and AI unit disappointed. The unit's revenue amounted to $4 billion, below Street estimates of $4.1 billion, marking a 10% decline compared to the same period last year.

This setback notably comes as Intel aims to compete with rivals like Nvidia and AMD in the data center and AI space. In December, CEO Pat Gelsinger showcased the company's upcoming Gaudi3 accelerator, designed to power generative AI software and services.

On a positive note, Intel's Client Computing Group saw growth, reporting fourth quarter sales of $8.8 billion, up 33% from the previous year and surpassing analyst expectations of $8.4 billion.

In their efforts to regain their manufacturing leadership and market share, Intel is actively working on becoming a foundry for other chip companies. However, their Intel foundry services division underperformed in Q4, generating $291 million in revenue, lower than the expected $343 million.

Intel's recent opening of a chip manufacturing facility in New Mexico is part of their ongoing turnaround plan. The company aims to reclaim its position at the forefront of the chip world, which they lost in recent years to competitors like TSMC and AMD.

Looking toward the future, Intel is banking on its Core Ultra line of PC chips to drive sales. The chips include a neural processing unit (NPU), enabling PCs to run AI applications locally without relying on cloud-based services. While the potential of onboard AI remains unclear, Intel is confident that it will bring value to consumers, offering capabilities such as local versions of ChatGPT-like apps and AI image-editing software.

In a press release, Gelsinger emphasized Intel's dedication to achieving process and product leadership, expanding their external foundry business, and "bringing AI everywhere" as they strive to create long-term value for stakeholders.

Before Thursday's decline, Intel's stock had seen a 45% increase over the past six months. The company hopes that the Core Ultra line of chips will boost PC sales, as consumers and enterprise customers who made pandemic-related technology purchases in 2020 begin seeking replacements.

As Intel faces both challenges and opportunities ahead, industry observers will be closely watching their execution and progress in the competitive chip market.