Intel shares tumbled over 12% Friday after the chipmaker released a dismal first-quarter revenue forecast.

The company, still struggling to gain traction in the booming AI market, expects revenue to fall short of expectations by more than $2 billion.

Analysts attributed the gloomy outlook to Intel’s lagging progress in AI, a sector driving significant growth for other chipmakers like Nvidia and AMD. While Intel holds a strong position in the PC market, its lack of a clear AI strategy raised concerns about its future competitiveness.

The disappointing forecast dragged down the broader semiconductor sector, with the Philadelphia SE Semiconductor Index shedding 2.7%. Other chipmakers, including Nvidia, AMD, Qualcomm, and Micron Technology, also saw share price declines, albeit to a lesser extent than Intel.

Despite the bleak outlook, some analysts remained optimistic about Intel’s long-term prospects. They pointed to the company’s strong financials and CEO Pat Gelsinger’s commitment to AI advancements, albeit at a slower pace than initially anticipated.

However, Intel’s current valuation, trading at 28 times its forward earnings compared to rivals AMD and Nvidia at 45 and 30 respectively, reflects investor apprehension about the company’s ability to catch up in the rapidly evolving AI landscape.