Mixed Quarter for Tech Giants: Intel Struggles, SK Hynix Soars on AI, IBM Stock Dips Despite AI Focus

Recent earnings reports from major players in the technology sector reveal a varied landscape. While demand for AI-related components is driving strong results for some, others are grappling with internal challenges and broader economic headwinds.

Intel Reports Loss and Weak Outlook Amid Turnaround Efforts

American chip-making giant Intel posted a quarterly loss and gave a weak revenue outlook, leading to a stock drop after hours. This follows a challenging period for the company, which has been struggling with manufacturing issues and faces challenges in the AI chip market against Nvidia.

In the first quarter, Intel's revenue was flat year-on-year at $12.7 billion, slightly above analyst expectations. However, the company reported an $821 million loss, wider than the loss in the same quarter last year. This marked Intel's fifth consecutive quarterly loss, the longest streak since at least 1990.

Performance varied across divisions. Sales in the division that sells chips for data centers and AI rose 8%. This was described as a rare bright spot. Its personal-computer chip division, the largest segment, saw sales fall 8% to $7.6 billion. The contract chip-making business reported $4.7 billion in revenue, up 7%.

Looking ahead, Intel gave a forecast of roughly $11.8 billion in revenue for the current quarter, which was lower than Wall Street forecasts of around $12.8 billion. This weaker outlook was attributed to “elevated uncertainty across the industry” in the current macroeconomic environment. The company's finance chief also noted that while Q1 revenue and the manufacturing business benefitted from customer purchasing ahead of potential tariffs, looking ahead, costs would increase and the market would contract as consumers and businesses face an uncertain economy.

Under new chief Lip-Bu Tan, Intel is embarking on a turnaround effort. This plan involves layoffs starting this quarter, reduced spending targets, and an aim to cut operating expenses significantly by 2025 and 2026. The company is also reducing its gross capital spending target this year, reflecting a slowdown in a large manufacturing expansion. Tan noted that “There are no quick fixes” for Intel and described the turnaround as incremental and extremely risky.

SK Hynix Posts Strong Results Driven by AI Chip Demand

In contrast to Intel's struggles, South Korea’s SK Hynix posted strong first-quarter earnings on AI chip demand. The company has been benefiting from robust shipments of high-bandwidth-memory (HBM) products, which are in high demand for high-performance computing and AI applications. SK Hynix is the main supplier of HBM for Nvidia’s most advanced GPUs.

SK Hynix reported a first-quarter net profit of 8.108 trillion won (equivalent to $5.68 billion). This figure beat market expectations and more than quadrupled the net profit from the same quarter last year. Revenue also saw a significant increase, rising 42% from a year earlier to 17.639 trillion won. The company's operating profit of 7.441 trillion won beat its bigger rival Samsung Electronics’ estimate.

Despite these strong results, the outlook for the global chip industry is clouded by uncertainty from potential U.S. tariffs, a factor that has also impacted SK Hynix's share performance this year.

IBM's Stock Falls Despite Decent Earnings and AI Consulting Focus

IBM, often referred to as ‘Big Blue,’ saw its stock fall after reporting decent earnings. The stock dropped 6.6% following the report.

CEO Arvind Krishna has focused on AI, building up $6 billion in bookings around generative AI, consisting mostly of consulting contracts. The company's software business is also described as growing.

However, the results raised concerns for analysts. J.P. Morgan analysts noted that the software business fell short of expectations in the first quarter when currency impacts were removed. Furthermore, the consulting business fell 2% in the quarter. The prospect of AI reshaping businesses has ironically led some companies to put off large IT projects, reducing the need for consulting. A more uncertain economic outlook also hangs over the consulting business.

Despite the focus on AI consulting and the CEO's efforts to revitalize the company, IBM trades at a premium compared with AI heavyweights like Nvidia and Microsoft. The company also faces the challenge of not having a strong record of capitalizing on major tech shifts like cloud computing or converting past AI successes into thriving businesses.