We have to talk about Intel. Intel’s shares fell 26% after a significant earnings miss and a major restructuring announcement, impacting global chip stocks, including TSMC and Samsung. The company reported a net loss of $1.61 billion and plans to lay off over 15% of its workforce, or 16,000 workers. The layoffs will primarily affect research, development, marketing, and administrative roles, with most cuts completed by the end of 2024. The semiconductor sector faces additional pressure from an antitrust investigation into Nvidia, contributing to a broader decline in chip-related stocks. Additionally, Intel will reduce capital expenditures by over 20% and suspend its quarterly dividend starting in Q4 to prioritize liquidity. These measures will save the company more than $10 billion by 2025.
Reuters covers Intel’s decision not to invest in OpenAI around 2017-2018 due to skepticism about the future of generative AI, contributing to its decline in the AI sector. While OpenAI has thrived, Intel has struggled to compete against rivals like Nvidia and AMD, failing to develop a cohesive AI product strategy and missing key market opportunities. Despite attempts to create viable AI chips through acquisitions and internal projects, Intel’s efforts have not gained traction.
Intel is extending the warranty on its 13th and 14th Gen Core processors by two years due to ongoing instability issues, bringing the total warranty to five years. While a patch is expected to address the root cause of the problems, it will not repair any existing damage, prompting customers to seek replacements for affected chips. Intel is committed to supporting customers through this process and will provide further details soon.
Why do we care?
Because Intel’s leadership blew it. Poor product quality, incorrect strategic choices, and a continued decline in value. Is anyone really eager to have an Intel chip in your device?
While I expect most IT service companies to view many chip manufacturers as irrelevant, as you are more interested in hardware manufacturers such as Dell, HP, Lenovo, or Apple, the value of “Intel Inside” is underwater. I wouldn’t be rushing to replace them, yet I would also not forget that.