Intel indicated it had difficulties meeting demand for its server chips utilized in AI data centers and projected quarterly revenue and profit below market expectations, causing shares to drop 10 percent in after-hours trading.

The prediction highlights the challenges Intel encounters in forecasting worldwide chip markets, as the company's existing products stem from choices made years earlier. The company, with a 40 percent increase in its shares over the last month, has recently introduced a long-anticipated laptop chip aimed at regaining its dominance in personal computers just as a memory chip shortage is likely to hinder sales in that sector.

At the same time, Intel leaders stated that the firm was surprised by the rising demand for server central processors that come with AI chips. Even while operating its factories at full capacity, Intel struggles to meet the demand for chips, resulting in lost lucrative data center sales as the new PC chip compresses its margins.

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"In the short term, I'm disappointed that we are not able to fully meet the demand in our markets," Chief Executive Officer Lip-Bu Tan says.

The company forecast current-quarter revenue between $11.7 billion and $12.7 billion, compared with analysts' average estimate of $12.51 billion, according to data compiled by LSEG.

It expects adjusted earnings per share to break even in the first quarter, compared with expectations of adjusted earnings of 5 cents per share.

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Investors and analysts have hoped that rapid data center buildouts commissioned by large tech companies to advance their AI businesses will drive sales for Intel's traditional server chips that are used alongside Nvidia's market-leading graphics processing units (GPU).

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"Demand for AI surprised some of the cloud-computing giants, which have had to scramble in order to upgrade aging fleets of chips because of an erosion in networking performance," finance chief David Zinsner says.