Brace Yourself! Intel's Stock Nosedives To Lowest In 10 Years, Suffers Worst Day on Wall Street In Half A Century

Intel shares plunged by 26% to $21.48, their lowest stock price since 2013, bringing the market capitalization below the $100 billion mark. This followed the company's disappointing earnings report and the announcement of a large restructuring plan.

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The Intel debacle directly affected the semiconductor industry worldwide, taking a toll on Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. TSMC, the world’s biggest chipmaker, slid 4.6% in Taiwan. In South Korea, the world’s largest memory semiconductor maker, Samsung Electronics plunged by more than 4%. The effects reached the Nasdaq composite index, which was down 2.4%, with most of it lost due to Intel’s plunge.

Intel’s latest quarterly financials were grim. The net loss was $1.61 billion, contrasted with a net income of $1.48 billion in the same period last year. Adjusted earnings per share came in at two cents, much worse than the 10 cents analysts had forecast, according to LSEG data. Revenue also missed forecasts, deepening the company's financial woes.

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In response, Intel announced several drastic measures. It would suspend its dividend payments for the fourth quarter of 2024, slash its full-year capital expenditure forecast by more than 20%, and cut more than 15% from its workforce as part of its $10 billion cost-cutting plan.

This will be the biggest change in its organizational structure since Intel switched to Memory Microprocessors forty years ago. In an interview, a confident Gelsinger shared with CNBC’s Jon Fortt, “We have laid out an audacious journey of rebuilding this company, and we’re going to get that done.”

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Gelsinger also pointed to the decision to increase production for Core Ultra PC chips, tailored for AI workloads, as a factor in the financial loss. He told analysts on the call that he hadn’t expected this kind of competitive pricing environment this quarter, with AMD and Qualcomm being much more aggressive than he anticipated. 

The company also announced job cuts that could be one of the biggest layoffs in recent tech industry history. This was communicated through a companywide memo from Gelsinger. Making matters worse for the semiconductor industry, the Department of Justice has started an antitrust investigation into Nvidia, the leader in AI chips. The department is investigating accusations that Nvidia has misused its market dominance in AI.

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Nvidia, however, has firmly denied any wrongdoing. A company representative emphasized, “We compete on the art of a decade’s worth of investment and innovation, scrupulously adhering to all laws, making NVIDIA openly available in every cloud and on-prem for every enterprise, and making sure customers can choose whatever solution is best for them.” He added, “We’re happy to provide any information regulators need.”

These shock waves were felt Friday in Europe, where the shares of major semiconductor firms – including ASML, STMicroelectronics, and Infineon – slumped. The VanEck Semiconductor ETF, which includes key players, declined 5.5% Friday, adding to its 6.5% drop the previous day.

This is the biggest challenge Intel has ever faced, with the whole industry on edge over potential disruption.

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