Intel is experiencing its most significant decline in 24 years, reflecting ongoing challenges in its turnaround efforts
Intel initiates a new tab. On Friday, the company was expected to experience its most severe stock market decline since 2000, as it suspended its dividend and reduced its workforce to finance a costly reversal of its chip-making business.
This move could result in the loss of nearly $25 billion in market value.
Intel forecast quarterly revenue below estimates and announced 15% job cuts late on Thursday, which raised concerns about its capacity to compete with Taiwan’s TSMC and other chipmakers. As a result, the company’s stock plummeted by nearly 21% in premarket trading.
Bernstein analyst Stacy Rasgon stated, “Intel’s issues are approaching the existential in our view.”
He stated that “going concerned” discussions would occur in other circumstances; however, Intel could add $40 billion in liquidity to its balance sheet by the end of 2025 due to the transactions, subsidies, and partner contributions.
“Intel will survive (in some form) to continue the fight,” according to Rasgon.
The shares of other semiconductor firms also experienced a decline, with Arm, Micron Technology, GlobalFoundries, and TSMC trading down between 2% and 5.1% on U.S. exchanges.
After a report regarding an investigation by the U.S. Department of Justice, Wall Street darling Nvidia experienced a 4% decline.
‘FORGOTTEN HORSEMAN’
Situated in Santa Clara In the 1980s and 1990s, the “Intel Inside” logo was a valuable marketing feature on personal computers, and Intel was once the world’s dominant chipmaker.
Intel’s stock market value reached nearly $500 billion in 2000 but plummeted that year and never completely recovered. Intel was one of the Four Horsemen of the dot-com era, along with Cisco Systems, Microsoft, and Dell.
It maintained its position as the leading manufacturer of substantial PC chips; however, it was taken off guard by the introduction of Apple’s iPhone in 2007 and other mobile devices that necessitated less expensive processors and consumed less power.
Intel’s market value will decrease to approximately $100 billion if Friday’s losses persist, equivalent to less than 5% of Nvidia’s and approximately 40% of Advanced Micro DDevicesThese two PC chip manufacturers were significantly influenced by Intel for decades until recently.
It was also anticipated that the selloff would result in Intel being worth less than Companies that provide equipment for Intel’s fabrication facilities, including Lam Research and Applied Materials, which open new tabs.
Michael Schulman, chief investment officer of Running Point Capital, stated that eliminating the dividend may influence the share price, as it would exclude Intel from any ETFs, indices, or fund strategies that exclusively include dividend recipients.
“In the past few decades, Intel has been one of the technology industry’s most overlooked players.” It failed to surpass the highs of the year 2000 and has been unable to restore earnings to their pre-AI levels.
The server chip business has been experiencing a decline for several years as companies prioritize the purchase of AI chips.
This has resulted in the company falling behind its competitor, Nvidia, which has become one of the most valuable companies in the world due to the increasing demand for its processors.
Intel is preparing to invest $100 billion in the construction and expansion of factories in four U.S. states to regain its manufacturing advantage. This decision was made after the company received $19.5 billion in federal grants and loans.
Its revival strategy is contingent upon convincing external organizations to utilize its manufacturing services.
However, analysts suggest that the initiative to revitalize the contracting foundry sector may require several years. It is causing Intel to incur additional expenses and experience a decline in profit margins.
In response to the results, the median price target (PT) for Intel’s stock was brought down to $31 by at least 12 analysts. In premarket trading, its shares were valued at $23.04.
The stock’s 12-month forward price-to-earnings ratio is 18.62, lower than AMD’s 29.42 and Nvidia’s 32.15.
