Intel reported second-quarter revenue of $16.1 billion on Thursday, beating analysts’ expectations by $1.7 billion. It was the company’s strongest revenue growth in more than fifteen years, according to CEO Lip-Bu Tan. Adjusted earnings per share came in at 42 cents. Yet the stock dropped 10.88% in the following session, and its relative strength index fell to 29.07 — a level that signals heavy selling.
A Revenue Beat That Didn’t Matter
Revenue rose 25% year-over-year, well above the $14.42 billion consensus estimate. CFO Dave Zinsner promised to increase spending on factory equipment and materials, a capital-intensive push Intel needs to keep up in the manufacturing race. But investors punished the stock anyway. The selloff erased $1.7 billion in market value — roughly the same amount Intel had just surprised the Street by.
Part of the reason: the broader semiconductor sector is under pressure. The SOXX ETF, which tracks chip stocks, traded about 15.7% below its June high. Scott Rubner, head of equity derivatives strategy at Citadel Securities, called the sector weakness a “rare chip signal” — a phrase that usually flags a deeper downturn.
Data Center and AI: The Bright Spot
Intel’s data center and AI unit grew 59% to $6.3 billion. That segment now accounts for nearly 40% of total revenue. Tan said the results reflect a “sharp turnaround” in demand for Intel’s server processors, particularly from cloud providers building out AI infrastructure. The unit’s growth rate outpaced the overall company’s top line and helped lift the bottom line.
But even that good news couldn’t stop the stock slide. AMD, Intel’s main rival in server chips, also fell 5.49% despite announcing a supply deal to provide 2 gigawatts of chips to Anthropic, backed by a $5 billion investment. AMD’s RSI stood at 40.99 after the decline — still in neutral territory, but moving lower.
Why the Stock Sank Anyway
Investors focused on two things: rising capital spending and a hawkish macro backdrop. Zinsner’s pledge to spend more on factory equipment signals that Intel’s profit margins may stay squeezed even as revenue climbs. The 10-year U.S. Treasury yield hit its highest level since January on the day of the earnings release, making growth stocks less attractive.
Jim Cramer posted “Intel’s the one” on social media after the results, turning bullish on the stock. But a study in Management Science found that Cramer’s stock picks typically jump 2.4% overnight and then fade over months — and the effect is strongest in small-cap stocks, not a $100 billion company like Intel. Before the earnings, Cramer had turned cautious on the overall market, citing oil prices, interest rates and Middle East tensions.
A Rare Chip Signal
Rubner’s warning adds to the unease. The SOXX ETF has been sliding since June, and the selloff accelerated after Intel’s report. The sector’s collective dip — Intel down 11%, AMD down 5.5%, and the SOXX still 15% off its high — creates a picture of broad-based weakness that one strong revenue beat couldn’t reverse.
Intel now faces a test: can it execute on its spending plan without cratering margins? The next quarterly report in October will show whether those factory investments are starting to pay off. Until then, the stock’s RSI at 29 suggests more sellers than buyers — and a rare chip signal that’s hard to ignore.
