Why are Intel and AMD stocks falling on Wednesday?

Intel and AMD shares extended their declines on Wednesday, even as a broader recovery across US markets helped major stock indexes regain ground lost in the previous sessions.

The S&P 500, Dow Jones Industrial Average and Nasdaq Composite all gained between 0.5% and 1% as Treasury yields eased following the US Treasury Department's announcement of an increased buyback operation for longer-term government debt.

Lower bond yields generally provide support to technology stocks by improving the relative appeal of future earnings.

But semiconductor stocks continued to lag.

The Philadelphia Semiconductor Index was down about 2%, with Broadcom also weighing on the group after Marvell Technology announced a custom AI chip agreement with Google.

Broadcom fell about 5%, while both Intel and AMD declined about 4% each.

The weakness suggests that investors remain selective within the chip sector, with company-specific concerns competing with the broader tailwinds from lower yields and continued AI spending.

Intel faces dilution concerns despite foundry optimism

Intel's decline has been partly driven by concerns surrounding the dilution created by its recently completed $20 billion common stock offering.

The offering, which closed on August 12 at $95 a share, involved approximately 210.5 million new shares and substantially increased the company's share count.

Bank of America estimates the additional shares could reduce Intel's earnings per share by about 4% to 5% as the dilution is incorporated into forward estimates.

The bank recently reduced its price target for Intel to $145 from $160 while maintaining a Buy rating.

At the same time, BofA has argued that the capital raise could strengthen Intel's ability to expand its foundry operations.

The size of the financing, according to the bank, demonstrates management's confidence that it can secure major customers for its manufacturing business.

UBS has also lowered its Intel price target, cutting it to $112 from $121 while retaining a Neutral rating.

The investment bank nevertheless said the capital raise could remove a major overhang for the stock by giving Intel the resources required to fund its foundry ambitions.

“When combined with pre-payments and financial commitments that we expect to accompany several forthcoming foundry deals (Google for EMIB-T, AAPL for M-Series, AMD, SPCX, and potentially a few more), we believe the raise will allow INTC to fund its foundry buildout,” UBS analyst Timothy Arcuri wrote in a note to clients.

“Overall we view the raise as a strong endorsement of INTC's confidence in its foundry roadmap.”

Intel gets support from Fitch

Intel has also received some positive signals from the credit markets.

Fitch Ratings on Monday affirmed Intel's Long-Term Issuer Default Rating and senior unsecured ratings at BBB, while maintaining its Short-Term IDR and commercial paper ratings at F2.

The ratings agency also revised its outlook to Stable from Negative.

Fitch said the decision reflected Intel's progress on its technology roadmap and better-than-expected operating performance.

The agency also viewed Intel's recent equity raise, which was aimed at supporting higher capital spending, as strengthening the company's ability to meet demand and reduce net debt.

Fitch expects Intel could begin reducing net debt in 2027 and bring EBITDA leverage below its 2.5 times negative rating sensitivity in the near term.

That provides some support for Intel's longer-term turnaround story, even as shareholders absorb the immediate impact of dilution.

AMD's AI opportunity faces high expectations

AMD's decline also came despite continued optimism surrounding its position in AI infrastructure.

The chipmaker recently priced a $4.75 billion bond offering to support its expansion into artificial intelligence and data centers.

According to NAI 500, it was AMD's largest-ever US dollar bond financing.

The transaction gives AMD additional financial flexibility, including ahead of $875 million of debt scheduled to mature next month.

The financing comes as AMD attempts to capture a larger share of the AI accelerator market and strengthen its position as an alternative to Nvidia.

Wall Street remains broadly optimistic about the company's long-term opportunity.

Baird, UBS, Goldman Sachs, Cantor Fitzgerald and Barclays have raised their price targets in recent months, with targets ranging from about $600 to $1,250.

Analysts have pointed to AMD's CPUs and GPUs, its EPYC server processors and its potential role in AI data centers and rack-scale systems as key drivers of future growth.