When Pat Gelsinger returned to Intelhopes were rising that he would restore one of Silicon Valley’s most famous brands to its former glory. Only two and a half years later Gelsinger has disappeared and the famous chip maker is losing money and facing an uncertain future.
Intel shares rose 5% on Monday after the company announced Gelsinger, 63, who began his career at the chipmaker in 1979, stepped down as CEO and also stepped down from the board. The move represented a vote of no confidence from investors who had initially cheered Gelsinger turnaround planwhich included regaining market share from chip design companies like Nvidia and semiconductor manufacturers like TSMC.
Intel failed to make headway on either front, missing out on the AI ​​boom and seeing its stock fall more than 60% during Gelsinger’s tenure.
“While we have made significant progress in regaining manufacturing competitiveness and building our ability to be a world-class foundry, we know we have much work to do at the company and are committed to restoring investor confidence,” Frank Yeary, Intel’s independent chairman of the board, said in a statement. statement Monday.
Once the largest chip maker in the world, Intel has fallen out of the industry first 10 companies by market capitalization, the list is now led by Nvidia and TSMC. Competitor AMDwhich has taken significant market share from Intel’s core business of manufacturing computer processing units, or CPUs, ranks sixth with a valuation of approximately $220 billion. This fall, Intel’s market capitalization fell below the $100 billion threshold for the first time since 2012.
This happened after the disaster earnings report in August sent the stock down more than 25%, its worst day since 1974. After severely missing profit and revenue targets for Q2the company announced that it will suspend the dividend it has paid to shareholders for more than three decades.
In response, the company also said it would cut its workforce by 15%, or roughly 15,000 jobs, as part of a $10 billion cost-saving measure. Later and Intel discovered its foundry, which competes with TSMC in semiconductor manufacturing, would become an independent subsidiary.
However, as Gelsinger was forced to scale back his ambitions, Nvidia plowed ahead and replaced Intel in Dow Jones Industrial Average. Nvidia’s graphics processing units, or GPUs, were originally developed for video games, but have since been at the center of the AI ​​boom. CEO Jensen Huang has indicated demand because Blackwell’s next generation offering dramatically exceeds supply.
Meanwhile, the success of another longtime Silicon Valley leader, (hotlink)Oracle,(/hotlink) underlines how much Intel has fallen. The software giant, which was founded in 1977, has kept investors excited in recent years with the incredible growth of its cloud business, which has led the stock to its best year in history except for 1999, when it roughly quadrupled in price. The company has re-emerged as a market darling as investors seek secondary gains from the rise of artificial intelligence.
Can funding from the CHIPS Act help spur a turnaround?
Meanwhile, Intel has fallen victim to the classic innovator’s dilemma not once but twice, as Fortune Jeremy Kahn recently explainedmissing the boat on AI after remaining complacent during the smartphone revolution.
Gelsinger believed there was time to catch up, especially with the US investing heavily to bring chip and semiconductor manufacturing back to American shores. The company has an agreement with Amazon make a new advanced AI chip and completed $7.9 billion in support last week as part of CHIPS and the Biden administration’s Science Act.
Still, there are concerns that Intel won’t find the money it needs to start this transformation. A colleague from a chip manufacturer Qualcomm there is allegedly approached Intel about a potential takeover, but interest reportedly cooled as Qualcomm became less enamored with the idea of ​​taking on more than $50 billion in debt.
Chief Financial Officer David Zinsner and Michelle Johnston Holthaus, a longtime Intel executive who is taking on a new role as CEO of the company’s product group, will serve as co-CEOs while the board of directors searches for a permanent replacement. It’s a prestigious position, but Gelsinger’s successor will have to be prepared for the long and difficult road ahead.
