Updates shares in paragraph 1; Adds background and analyst comment in paragraphs 11-12

By Zaheer Kachwala and Kanchana Chakravarty

April 25 (Reuters) - Intel's INTC.O shares fell more than 8% on Friday as the company's weak revenue and profit forecasts overshadowed new CEO Lip-Bu Tan's strategy to revitalise the embattled chipmaker.

Years of bad decisions have left the struggling American chipmaking icon trailing in the lucrative artificial intelligence industry, while a raging Sino-U.S. trade war casts doubt on near-term demand for its PC processors.

Tan on Thursday gave glimpses of his plans to reanimate Intel's culture of innovation by focusing on core engineering, stripping away unnecessary administrative work and cutting workforce.

"Intel is so huge that shifting its course is like turning a battleship – it cannot be done on a dime," Evercore ISI analysts said.

Tan did not provide much detail on how he will restore Intel's leadership position in manufacturing, nor on his plans to attract more external customers to the company's foundry, J.P.Morgan analysts said.

Tan remains focused on the contract manufacturing business and has recently met rival TSMC'S 2330.TW CEO to discuss how the two companies could collaborate.

Executives said first-quarter sales were boosted by customers stockpiling chips as growing tariff tensions between the U.S. and China have made buyers wary of future purchases.

Intel could also stand to benefit if China introduces certain exemptions on U.S. imports given the company's large presence in the Asian country, Ben Barringer, global technology analyst at Quilter Cheviot, said.

AI STRATEGY IN QUESTION

Tan's comments about sharpening Intel's existing products to best suit emerging AI trends have sparked questions on how the company plans to get ahead in the booming artificial intelligence sector and challenge market leader Nvidia NVDA.O.

"Intel needs to streamline fast – they have a lot of investments to make to catch up in AI," Stifel analyst Ruben Roy said.

Historically, Intel has relied on buying startups to further its AI ambitions. Other than Mobileye which Intel spun out a few years ago, the other deals didn't help the company gain much traction.

"Intel should have always had its own internal solution, but it missed the boat and tried to acquire its way into AI," Anshel Sag, principal analyst at Moor Insights & Strategy, said.

One of Intel's biggest missteps was failing to capitalize on the booming demand for AI chips, allowing Nvidia to dominate the market.

Intel now faces an uphill battle in challenging AI heavyweights as it lacks the same level of GPU intellectual property which is essential for AI workloads, Barringer added.

The company's stock has gained 7.2% so far this year, outperforming Nvidia and Advanced Micro Devices AMD.O, which have fallen nearly 20% each.

Intel, however, trades at a higher 12-month forward price-to-earnings ratio of 31.37 versus 22.70 for Nvidia and 19.24 for AMD.

(Reporting by Zaheer Kachwala, Kanchana Chakravarty and Arsheeya Bajwa in Bengaluru; Additional reporting by Amanda Cooper in London; Editing by Nivedita Bhattacharjee and Shounak Dasgupta)

((amanda.cooper@thomsonreuters.com; +442031978531; Bluesky: @acoops.bsky.social))