Intel’s stock plunged about 28% on Friday following a disappointing forecast for the fourth quarter, resulting in a $12 billion loss in value for the U.S. government’s 10% stake in the company. This investment was made during the Trump administration over a year ago. Meanwhile, Nvidia, which took a significant stake in Intel last year, also experienced a slight stock decline amid a broader sell-off in the technology sector, particularly impacting chipmakers.

The main driver behind the stock collapse was Intel’s warning of lower-than-expected revenue between $15 billion and $16 billion for the upcoming quarter, falling short of analysts' estimates near $17 billion. The chipmaker further projected a sharp decline in its gross profit margin from 43% to 37%, and emphasized that heavy investments would lead to no positive cash flow. Intel CEO Lip-Bu Tan highlighted that rising PC prices, fueled by increased demand for memory and components in the AI industry, were slowing PC sales as customers faced budget constraints.

Despite the challenges in the PC segment, Intel reported strong growth in its data center business, with revenue expanding 78% year-over-year. However, production capacity constraints continue to limit the company’s ability to capitalize fully on this growth, as its new fabrication plants are only partially operational. The primary fab in Arizona is online, but additional facilities won’t be available until 2028, putting Intel in direct competition with industry leader Taiwan Semiconductor Manufacturing Co.

This sharp adjustment in Intel’s stock underscores the difficulties the chipmaker faces amid shifting market dynamics influenced by AI’s resource demands and supply limitations. While the government’s investment remains profitable on a yearly basis, the recent sell-off signals ongoing concerns over Intel’s near-term financial performance and operational challenges as it seeks to scale its semiconductor manufacturing capacity.