Market News Updates: After cutting jobs and suspending dividends to finance an expensive turnaround for its chip manufacturing division, Intel was expected to lose almost $35 billion in market value on Friday, possibly the largest selloff in company history.
Concerns over Intel’s capacity to catch up to Taiwan’s TSMC and other chipmakers surfaced late on Thursday when the business revealed 15% job cutbacks and predicted quarterly revenue below projections. As a result, the stock of the company dropped by almost 28%.
Analyst Stacy Rasgon of Bernstein stated, “In our opinion, Intel’s problems are now getting close to the existential.”
Under other conditions, he added, “going concern” conversations would take place, but through the actions, Intel may add $40 billion in cash to its balance sheet by the end of 2025 in addition to partner payments and subsidies.
“Intel will survive (in some form) to continue the fight,” Rasgon stated.
Other chip companies saw a decline in share prices as well; Arm, Micron Technology, GlobalFoundries, and TSMC’s U.S.-listed shares all saw decreases of 2.8% to 6.7%.
Following a news regarding an inquiry by the US Department of Justice, Wall Street darling Nvidia saw a 2% decline.
‘FORGOTTEN HORSEMAN’
Based in Santa Clara Intel used to be the top chip manufacturer in the world, and in the 1980s and 1990s, the “Intel Inside” emblem served as a useful marketing tool for personal computers.
As one of the Four Horsemen of the dotcom era, together with Dell, Microsoft, and Cisco Systems, Intel’s stock value peaked at around $500 billion in 2000 before falling that year and never fully rebounding.
Although it still held a dominant market share in large PC chips, the 2007 release of Apple’s iPhone and other mobile devices that required less expensive and lower-power CPUs caught it off guard.
The market value of Intel would drop to roughly $90 billion if Friday’s losses continue, which is less than 5% of Nvidia’s and roughly 40% of Advanced Micro Devices’, the two PC chipmakers it largely controlled for decades until recently.
Additionally, the selloff was expected to reduce Intel’s value relative to businesses that provide equipment to Intel’s fabrication facilities, such as Lam Research and Applied Materials.
Running Point Capital chief investment officer Michael Schulman stated, “Eliminating the dividend may put pressure on the share price because it will knock Intel out of any ETFs, indices, and fund strategies that only include dividend payers.”
Over the past few decades, Intel has been one of technology’s forgotten heroes. Never surpassing its peaks from the year 2000 and finding it difficult to return to revenues prior to the AI revolution.”
As businesses focus more on AI chips, its server chip business has been suffering for a number of years. In this regard, it lags behind rival Nvidia, which has grown to become one of the most valuable companies in the world as a result of the surge in demand for its processors.
After obtaining $19.5 billion in federal grants and loans, Intel intends to invest $100 billion in the construction and expansion of factories across four U.S. states in order to reestablish its manufacturing competitiveness.
Convincing outside businesses to use its manufacturing services is essential to its turnaround strategy. However, experts predict that it may take years to revitalize the contracting foundry industry. For the time being, it is pushing Intel’s profit margins and raising costs.
Following the report, at least 14 analysts cut their price targets for Intel’s shares, bringing the median PT down to $28. On Friday, its shares were trading at $20.6, more than 11 years below their peak.
In comparison to Nvidia’s 32.15 and AMD’s 29.42 price-to-earnings ratios, the stock has a 12-month ahead ratio of 18.62.