More Tales From Nvidia: A Great Example of AI’s Tendency to Hallucinate (Issue #223)
This is from Google Gemini. The query was about Intel, and why the stock is down today after the good quarter and guidance.
Do not need to get past the first section to make the point. The rest of it is no better. Starting with #1 “Weak Next Q Guidance” – it uses as its source reference this link, which is from January 23, 2026: https://www.tikr.com/blog/intel-stock-crashes-as-weak-revenue-guidance-misses-analyst-targets
This is of course irrelevant. It is the wrong quarter. But for whatever reason, the AI is compelled to generate an answer, when it doesn’t know. It is not even intelligent enough to realize the source link is the wrong quarter. The word “today” was used in the query, so that is not an excuse either. It likely just grabbed on to the notion that the article referenced weak guidance and the stock going down.
A great example of both how the AI works (ergo what it really does), and why it cannot think, even at a very simple level, ergo Jan 23 2026 is not today. Gen AI is and always will be not much more than a predictive text generator. Good for mechanistic processes in terms of output (coding is mechanistic), but still incredibly compute and power intensive (dis-economic) to generate that output. A company providing free humans to code would grow its revenue rapidly too, if its losses were continually financed.
Clearly, with all the money being spent (even Google is now cash flow negative), this problem has not been solved. Which means, as far as Gen AI alone is concerned, it probably never will be. It is just endemic to the technology. This is a commodity industry. Open Source will win. Not just the Chinese, any open source. I keep writing the same thing (in the More Tales series), if I was running one of these things I would prioritize doing the same thing 98% as well, but 98% cheaper (currently the Chinese but it could be the U.S. too), and then focusing my resources on a new and different approach that might be more effective and less compute and resource intensive like neuro symbolic AI or world models or something else.
Q: Why is intc stock down today after the good quarter and guidance
A: Intel’s stock reaction boils down to a classic “buy the rumor, sell the news” dynamic, where a strong quarter was overshadowed by near-term operational bottlenecks.While Intel (INTC) beat Wall Street’s expectations for both top-line revenue and earnings per share in its reported quarter, the market is laser-focused on the company’s near-term outlook and supply chain friction.Here are the primary reasons why the stock is pulling back:
1. Weak Next-Quarter Guidance
Although current results exceeded expectations, Intel’s forward guidance for the upcoming quarter fell short of Wall Street estimates.
- Revenue and Profitability Miss: Midpoint revenue estimates for the next quarter came in below consensus, and adjusted earnings per share are projected near breakeven ($0.00) versus the profit analysts expected.
- Sequential Drop: The guidance implies a sharp ~15% sequential decline in revenue, signaling a bumpier road ahead than the market had priced in.
2. Industry-Wide & Internal Supply Constraints
The biggest concern spooking investors isn’t a lack of demand—it’s Intel’s inability to fully capitalize on that demand.
- Exhausted Buffers: Management noted that the inventory and wafer production buffers used to satisfy customer demand in late 2025 are largely depleted entering early 2026.
- Component Shortages: Intel highlighted severe industry shortages in wafers, advanced packaging, substrates, and memory.
- Prioritization Shift: To capture booming AI data center demand, Intel redirected wafer capacity from its Client Computing (PC) division to its server division. Because manufacturing lead times take a couple of quarters to flow through, this leaves supply heavily constrained in the near term.
3. Manufacturing Yield Concerns
Investors remain sensitive to Intel’s ongoing foundry transformation. Management acknowledged that manufacturing yields on key advanced technology nodes—while tracking to internal roadmaps—are still lower than desired, raising questions about margin recovery and execution risk.
4. Profit Taking After Recent Rallies
Ahead of the earnings report, INTC experienced a significant run-up as bullish sentiment around its AI and foundry turnarounds mounted. With the high expectations built into the stock price, even a temporary pause in growth velocity gave investors a reason to lock in profits.
The Takeaway: The underlying demand across AI data centers and client computing remains solid, but Wall Street is punishing the stock for short-term supply chain bottlenecks and low initial-quarter guidance that will test the execution of Intel’s multi-year turnaround.
Positions: Long GOOGL VVS
