Intel was set to erase nearly $25 billion US in stock market value on Friday in potentially its worst sell-off since 2000, after it suspended its dividend and slashed its workforce to fund a costly turnaround for its chipmaking business.
The company’s stock fell nearly 21 per cent in pre-market trading after Intel late on Thursday forecast quarterly revenue below estimates and announced 15 per cent job cuts, raising worries about its ability to catch up with Taiwan’s TSMC and other chipmakers.
“Intel’s issues are now approaching the existential in our view,” Bernstein analyst Stacy Rasgon said.
He said there would be “going concern” talks in other circumstances, but Intel could add $40 billion in cash to its balance sheet by the end of 2025 through the moves, as well as subsidies and partner contributions.
“Intel will survive [in some form] to continue the fight,” Rasgon said.
CBC News reached out to Intel to ask whether employees in Canada were impacted by the layoffs. A statement from the company said that it would not be disclosing specific headcount numbers by site or geography.
Shares of other chip firms also fell, with Arm, Micron Technology, GlobalFoundries and U.S.-listed shares of TSMC trading down between two per cent and 5.1 per cent.
Wall Street darling Nvidia was four per cent lower after a report about an anti-trust investigation by the U.S. Department of Justice.
A forgotten horseman of technology
Santa Clara, Calif.-based Intel was once the world’s leading chipmaker, with the “Intel Inside” logo a valuable marketing feature on personal computers in the 1980s and ’90s.
Part of the dotcom era’s Four Horsemen — along with Cisco Systems, Microsoft and Dell — Intel’s stock market value peaked at nearly $500 billion in 2000 before slumping that year and never fully recovering.
It continued to dominate in hefty PC chips, but it was caught off foot by the launch of Apple’s iPhone in 2007 and other mobile devices that demanded lower power and less pricey processors.
If Friday’s losses hold, Intel’s market value would fall to about $100 billion, equivalent to less than five per cent of Nvidia’s and about 40 per cent of Advanced Micro Devices’, the two PC chipmakers it heavily dominated for decades until recently.
The sell-off was also set to leave Intel worth less than Applied Materials and Lam Research, companies that supply equipment for Intel’s fabrication plants.
“Eliminating the dividend may pressure the share price because it will knock Intel out of any ETFs, indices and fund strategies that only include dividend payers,” said Michael Schulman, chief investment officer of Running Point Capital.
“Intel has been one of the forgotten horsemen of technology the last couple decades. Never overtaking its year 2000 highs and struggling to get earnings back to where they were before the AI revolution.”
Its server chip business has been taking a hit for several years as companies prioritize spending on AI chips, where it lags rival Nvidia, which has become one of the world’s most valuable firms thanks to booming demand for its processors.
To regain its manufacturing edge, Intel is planning to spend $100 billion across four U.S. states to build and expand factories after securing $19.5 billion in federal grants and loans.
Its turnaround plan depends on persuading outside companies to use its manufacturing services. But analysts say the push to energize its contracting foundry business could take years. For now, it is increasing Intel’s costs and pressuring profit margins.
At least 12 analysts lowered their price target on Intel’s stock after the results, pushing down the median price target to $31. Its shares were at $23.04 in pre-market trading.
