Intel's stock plunged 29% in a single trading session on Thursday, October 29, 2026, erasing approximately $11.3 billion in value from the U.S. Commerce Department's equity stake in the semiconductor company -- a direct consequence of the August 2025 agreement in which the government converted CHIPS Act subsidies into ownership, purchasing 433 million shares at $20.47 each. The Wednesday closing price stood at $92.07; on Friday, October 30, shares traded around $65.91, a 28.41% decline from the previous close.
The third quarter 2026 financial results, released Thursday, told a story of two halves that investors read as cause for concern. Gross revenue of $16.5 billion beat expectations and grew 21% year over year, with non-GAAP gross margin of 44.1% -- roughly 200 basis points above the company's own guidance. Adjusted earnings per share came in at $0.52, versus $0.40 expected by the market. Operating cash flow reached $5.91 billion.
But the fourth-quarter guidance is what truly triggered the selloff. Intel projected revenue between $15 billion and $16 billion for the following quarter, below the Wall Street consensus estimate of $17 billion. Earnings per share were estimated at $0.25 -- down from $0.52 in the third quarter -- and gross margin would fall to 38%, a sharp decline from the 44.1% recorded in the prior quarter. CFO Dave Zinsner explained that the decline reflects both the persistence of weakness in the PC market and the rising costs associated with global memory supply-chain crises.
The most intriguing detail -- and the one that best captures the paradox of Intel in 2026 -- is that the very artificial intelligence boom driving the company's fastest growth in 15 years in the data-center segment is simultaneously strangling its PC business. Revenue from the Data Center and AI group jumped 78% year over year to $7.3 billion, with broad growth across hyperscale, enterprise, and NeoCloud customers. Revenue from purpose-built silicon rose more than 50% sequentially and doubled year over year.
On the other hand, the Client Computing and Physical AI Group -- which manufactures chips for personal computers -- generated revenue of $8.1 billion, a 5% decline year over year and below market expectations. CEO Lip-Bu Tan was direct during the earnings call: "I am disappointed that we were not able to meet strong customer demand in this quarter. We face near-term challenges, including manufacturing supply shortage, the unprecedented memory crunch, and the resulting softness in PC demand."
The memory supply chain is the central point of this contradiction. Companies like Samsung, SK Hynix, and Micron are selling memory chips at increasingly high prices, fueled by the insatiable demand from AI data centers. This generates record profits for memory manufacturers -- Samsung and SK Hynix announced record quarterly profits in recent weeks -- but pressures costs for Intel, which buys these chips and integrates them into end products. The result: laptops and desktops become more expensive, consumers delay purchases, PC assemblers reduce shipments, and ultimately Intel sells fewer PC processors.
Intel's outlook for the PC market is bleak. The company expects the total PC unit market to decline approximately 12% in 2026, with the second half seeing drops exceeding 20%. The decline is projected to extend into the first half of 2027, with a projected 10% drop for the full year. "I think in 2027 it is going to be a very severe issue for all of us," Tan said, adding that "we are not alone -- the whole market is being impacted."
Artificial intelligence, which should be Intel's salvation, is behaving like a double-edged sword. The data-center segment is growing at a rate the company has not seen in 15 years. But the memory shortage this same growth generates is strangling the other half of the company's business. And the foundry unit, which was supposed to be the next big turnaround, still operates at an operating loss -- $2.1 billion in fiscal Q2 2026 -- though it grew 58% in revenue to $6.7 billion in the third quarter.
The U.S. Commerce Department, which holds 433.3 million ordinary shares and warrants on an additional 240.5 million shares, sees the value of its stake fall from approximately $39.9 billion to $28.56 billion in a single day of trading. This represents an accounting loss of $11.3 billion. The government is still $19.66 billion above the initial investment of $8.9 billion -- which equals 3.2 times the original cost -- but no sale of those shares has been announced, meaning the loss remains "paper" and materializes fully only if the government decides to unwind the investment.
The situation reveals something few analysts were willing to say out loud: Intel's bet on foundry transformation, the massive $20 billion investment for 2026, and reliance on government subsidies to maintain the pace, places the company in a position of fragility that the stock market has finally decided to price in. The 29% decline is not just about quarterly numbers -- it is about the perception that Intel's rebuilding may be further away than investors had hoped.
Sources: TechCrunch, CNBC, Business Insider
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