Intel Shares Drop 5.8% After Weak Q2 Forecast Amid U.S.-China Trade Tensions, Despite Tech Market Rally

Intel Corp. shares dropped 5.8% in extended trading after the company forecasted second-quarter revenue between $11.2 billion and $12.4 billion, below Wall Street's $12.82 billion estimate. The weak outlook, attributed to U.S.-China trade tensions, overshadowed a market rally driven by tech stocks. Intel's CFO David Zinsner cited tariff uncertainty as a key factor. Despite Intel's forecast, major U.S. indexes rose, with technology stocks leading gains amid optimism over easing trade tensions. Intel plans cost-cutting measures, including workforce reductions, to address challenges in the competitive chip market.

Intel Misses Revenue Forecast, Cites Tariff Uncertainty

Intel projected second-quarter revenue between $11.2 billion and $12.4 billion, below analysts’ average estimate of $12.82 billion, according to LSEG data. The company also forecast adjusted earnings per share to break even, compared to expectations of $0.06 per share.

The Santa Clara-based semiconductor giant attributed the weak outlook to a pullback in customer demand following a first-quarter sales boost driven by chip stockpiling ahead of potential tariff hikes. “Our guidance this quarter is a reflection of this uncertainty caused by tariffs,” said CFO David Zinsner.

Intel’s first-quarter revenue came in flat at $12.67 billion, slightly above expectations of $12.30 billion. However, the company’s outlook for the June quarter raised concerns about its ability to navigate geopolitical headwinds and regain momentum in the competitive chip market, particularly in artificial intelligence and data center segments.

The company also announced cost-cutting measures, including a reduction in its adjusted operating expense target to $17 billion for 2025, down from $17.5 billion, and a further cut to $16 billion in 2026. CEO Lip-Bu Tan, in his first earnings call since taking the helm, emphasized plans to streamline operations, reduce management layers, and implement workforce reductions beginning in the second quarter.

“There is no way around the fact that these critical changes will reduce the size of our workforce,” Tan wrote in a memo to employees. Intel also lowered its 2025 capital expenditure target to $18 billion from $20 billion.

China Tariffs Cloud Intel’s Outlook

Intel’s exposure to China remains a key vulnerability. In 2024, nearly 30% of the company’s revenue came from the Chinese market. While U.S. President Donald Trump has so far spared semiconductors from direct tariffs, China has imposed retaliatory levies of up to 85% on U.S.-made chips, including those manufactured by Intel.

According to Bernstein analysts, China imports $10 billion worth of chips from the U.S. annually, with $8 billion of that attributed to Intel’s central processing units (CPUs). The high tariffs threaten to erode Intel’s competitiveness in its largest overseas market.

Wells Fargo analysts noted that Intel’s domestic manufacturing strategy, while aimed at reducing reliance on foreign supply chains, could accelerate its market share decline in China due to the retaliatory tariffs.

Wall Street Rallies on Tech Strength and Tariff Optimism

Despite Intel’s disappointing forecast, U.S. equity markets closed sharply higher on Thursday, buoyed by strong performances in the technology sector and growing optimism over a potential de-escalation in U.S.-China trade tensions.

The Dow Jones Industrial Average rose 486.83 points, or 1.23%, to 40,093.40. The S&P 500 gained 108.91 points, or 2.03%, to close at 5,484.77, while the Nasdaq Composite surged 457.99 points, or 2.74%, to 17,166.04.

Technology stocks led the rally, with the S&P 500 tech sector climbing 3.5%. ServiceNow shares soared 15.5% after the company reported better-than-expected earnings, driven by strong demand for its AI-powered software. Other notable gainers included Hasbro (+14.6%), Microchip Technology (+12.38%), and Allegion (+10.32%).

Semiconductor stocks also posted strong gains. On Semiconductor rose 9.12%, Marvell Technology added 6.62%, and Texas Instruments advanced 6.56%. Nvidia gained 3.62%, while Arm Holdings climbed 6.51%.

The Nasdaq 100 Index rose 2.79%, with the Invesco QQQ ETF (QQQ) up 2.81% to $467.35.

Easing Tariff Rhetoric Fuels Market Optimism

Investor sentiment was lifted by comments from U.S. Treasury Secretary Scott Bessent, who signaled that the White House may be open to reducing tariffs on Chinese goods. Beijing responded by calling for the cancellation of U.S. tariffs, further fueling hopes of a thaw in trade relations.

While no concrete agreements have been reached, the shift in tone was enough to boost risk appetite, particularly in sectors most exposed to global trade, such as semiconductors and consumer electronics.

“The market is cheering Trump’s positive tariff signals,” said Ben Werschkul of Yahoo Finance. “Even though there’s no concrete evidence of progress, the rhetoric alone is enough to drive a rally.”

Paul Nolte, senior wealth advisor at Murphy & Sylvest, noted that chipmakers have been at the center of the trade dispute. “Any cooling of tariff talks between the two countries bolsters the technology sector as a whole,” he said.

Broader Market Trends and Earnings Season

The rally came amid a mixed earnings season. Of the 157 S&P 500 companies that have reported so far, 74% have beaten expectations, according to LSEG. Analysts now expect aggregate S&P 500 earnings growth of 8.9% year-over-year, up from 8.0% at the start of April.

However, not all companies offered upbeat guidance. Procter & Gamble and PepsiCo both cut forecasts due to consumer uncertainty, with shares falling 3.7% and 4.9%, respectively. IBM shares dropped 6.58% after warning of federal spending cuts.

Trading volume on U.S. exchanges totaled 14.95 billion shares, below the 20-day average of 19.15 billion. Advancing issues outnumbered decliners by a 5.84-to-1 ratio on the NYSE and 3.38-to-1 on the Nasdaq.

References

• Intel Reports First-Quarter 2025 Financial Results
• Stocks Rally on Strength in Big Tech and Dovish Fed Speak
• Trump tariffs live updates: Trump, China at odds on progress as Bessent hints at quick deal with South Korea
• Earnings Reports Preview | New leader's first test! Can Intel (INTC.US) resolve the tariff crisis?