Intel drops 6% as chip selloff deepens ahead of July earnings

Intel Corp. fell 6.12% to $103.12, its steepest single-day decline in months, as a broad selloff in semiconductor shares deepened.

"The ongoing swings in semiconductor shares has made it difficult for tech to mount a sustained push to the upside," Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley, said. "Escalating hostilities and rising oil prices won't help the bullish cause."

The decline outpaced the broader market. The S&P 500 fell 0.8%, while the Nasdaq 100 dropped 1.9%. Among chip peers, Advanced Micro Devices Inc. lost about 4%, Micron Technology Inc. slid 7% and SanDisk Corp. tumbled 10%. The selloff followed SK Hynix Inc.'s US-listed shares slumping 7% after their Nasdaq debut on Friday, when the stock had surged 13%.

Intel is scheduled to report second-quarter earnings on July 23. Analysts project EPS of $0.21, up 310% from a year earlier, on revenue of $14.35 billion, according to Zacks Consensus Estimates. For the full year, the consensus calls for earnings of $1.06 per share and revenue of $58.36 billion, representing growth of 152% and 10.4%, respectively.

The stock's forward price-to-earnings ratio of 103.62 trades at nearly double the semiconductor industry average of 57.17, reflecting expectations for a sharp earnings recovery. Intel carries a Zacks Rank of #1 (Strong Buy), with consensus EPS estimates rising 0.84% over the past month.

The chip sector rout unfolded as escalating US-Iran tensions pushed oil prices higher. West Texas Intermediate crude rose 8.9% to $77.76 a barrel, while Brent crude topped $83. The spike in energy costs fueled bets the Federal Reserve may need to raise interest rates, with money markets pricing about 50% odds of a hike in July. The yield on 10-year US Treasuries rose five basis points to 4.61%.

Intel is spending €5 billion ($5.7 billion) to expand its plant in Ireland as the chipmaker attempts to regain manufacturing dominance for the AI boom. Taiwan Semiconductor Manufacturing Co., the industry leader, reported a 36% jump in quarterly sales, a sign that global demand for AI computing remains intact. Meta Platforms Inc. has also committed to spending an additional $40 billion on its Louisiana data center campus, pushing its total expected investment beyond $250 billion.

The 6% decline puts Intel shares at their lowest level since late June, testing support near the $100 mark. Investors will watch the July 23 earnings call for updates on data center revenue and foundry margins, two metrics that will determine whether the stock's premium valuation is justified.

This article is for informational purposes only and does not constitute investment advice.