Intel suffered its worst day: the company lost almost $40 billion in value

Intel’s share price plunged 29% on Friday (via Reuters) after the company said it would suspend dividends starting in the fourth quarter of this year and plans to cut 15% of its workforce in a bid to cut financial costs amid its latest dismal financial report. At the time of publication of this note, Intel’s share price was $21.51. Since the beginning of the year, they have lost more than 50% in price.

Image Source: Intel

Intel could lose up to $40 billion in market value after it gave a disappointing financial forecast and said it would cut its workforce by 15%. The processor maker’s announcements fueled investor concerns about its ability to catch up with Taiwan’s TSMC, as well as other chipmakers. According to Reuters, today was the worst day for Intel on the stock market since 1974.

«In our view, Intel’s problems are now approaching existential levels,” Bernstein analyst Stacy Rasgon told Reuters.

Rasgon believes that thanks to the steps taken, as well as subsidies and investments from partners, Intel will be able to replenish its cash balance by $40 billion by the end of 2025. According to Reuters, it is not only Intel that has faced difficulties. Share prices of other chip makers fell for the second day in a row. All this comes against the backdrop of the latest unemployment report, which on Friday caused a sharp increase in concerns about the slowdown of the US economy, forcing traders to speculate that at the next Fed meeting the regulator could cut the base rate by half a percentage point.

Image Source: Reuters

Share prices of companies that sell equipment used by Intel and other chipmakers also fell sharply, signaling investors’ doubts about the pace of future investment in manufacturing infrastructure. Shares of Applied Materials, ASML Holding and KLA Corp fell about 8%. The PHLX semiconductor index fell nearly 6%, bringing losses over the past two days to nearly 13%. Shares of Nvidia, the dominant maker of AI accelerators, fell more than 3% on Friday and are down nearly 7% for the week.

According to Reuters, Intel was once the world’s leading chip maker, and the “Intel Inside” logo was a valuable marketing element for personal computers in the 1980s and 1990s. She was one of the so-called “Four Horsemen of the dot-com era.” Along with Cisco Systems, Microsoft and Dell, Intel’s market value peaked at nearly $500 billion in 2000 before plummeting that year and never fully recovering.

The company continued to dominate the market for high-power PC processors, but was caught off guard by the release of Apple’s iPhone in 2007 and other mobile devices equipped with more energy-efficient and less expensive processors.

If Friday’s loss pattern continues, Intel’s market value would fall to about $90 billion, less than 5% of Nvidia’s and 40% of AMD’s, the two major PC chip makers that Intel dominated for decades until recently.

«Intel has been one of the forgotten horsemen of technology for the past decades. It has never surpassed its 2000 highs and has struggled to return earnings to pre-AI levels,” said Michael Schulman, chief investment officer at Running Point Capital.

Intel’s server business has been losing money for years as it prioritizes spending on AI-enabled chips, but it lags far behind Nvidia, which has become one of the world’s most valuable companies thanks to soaring demand for its AI graphics accelerators. To regain its manufacturing advantage, Intel plans to invest $100 billion in building and expanding its factories after receiving $19.5 billion in federal grants and loans.

The success of Intel’s turnaround plan also depends on whether it can convince outside chip companies that don’t have their own manufacturing facilities to use the manufacturing capabilities of Intel’s Foundry contract business. However, analysts believe that the necessary boost to the growth of this business may take years. So far, this business only increases Intel’s losses and has a negative effect on its profits.