Pat Gelsinger, chief executive officer of Intel Corp., speaks during the Computex conference in Taipei, Taiwan, Monday, June 4, 2024. Gelsinger took the stage at the Computex exhibition in Taiwan to talk about new products that he expects will help on the return the wave of share losses in peers including AI leader Nvidia Corp. Photographer: Annabelle Chih/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images
Intel Shares posted their biggest plunge in 50 years on Friday, hitting a price not seen since 2013, after the chipmaker reported a big profit loss and announced a massive restructuring.
The stock fell 27% to $21.22 in late morning trading. It would be the second-worst day ever for the stock, after falling just 31% in July 1974, three years after Intel’s IPO. The company’s market cap is now under $100 billion.
The dramatic selloff contributed to a 2.4% drop in the Nasdaq and sent global semiconductor stocks lower. Taiwan Semiconductor Manufacturing Co. — known as TSMC — closed 4.6 percent lower in Taiwan and Samsung was down more than 4 percent at the end of the session in South Korea. TSMC is the world’s largest chip maker, while Samsung is the world’s largest memory semiconductor company.
Intel’s numbers were bad across the board.
The company posted a net loss of $1.61 billion, after reporting a net profit of $1.48 billion in the prior period. Adjusted earnings per share of 2 cents fell well short of analysts’ average estimate of 10 cents, according to LSEG. Revenue also missed expectations.
Intel said it would not pay its dividend in the fiscal fourth quarter of 2024 and cut its full-year capital spending forecast by more than 20%. The company said it would lay off more than 15 percent of its workforce as part of a $10 billion cost-cutting plan.
“This is Intel’s most significant restructuring since the memory microprocessor transition four decades ago,” Intel CEO Pat Gelsinger told CNBC’s John Fort in an interview that aired Friday. “We’ve been on a bold journey of rebuilding this company, and we’re going to do that.”
A decision to faster produce Core Ultra PC chips that can handle artificial intelligence workloads contributed to the loss, Gelsinger said on a conference call with analysts. The company said pricing was more competitive than planned during the quarter as AMD, Qualcomm and others work to take market share from Intel, which has fallen far behind its rivals. in the battle of artificial intelligence.
The job cuts will take place mostly this year, Gelsinger wrote in a note. It’s the largest of any job cut reported on Layoffs.fyi, an industry tracker running since March 2020.
Competition on merit
Adding pressure to the chip sector is a report from The information this AI chip maker Nvidia is the subject of an antitrust investigation by the US Department of Justice.
The DOJ is looking into allegations that the company allegedly abused its market dominance in artificial intelligence, The Information reported.
In response, an Nvidia spokesperson said the company is “earning on merit.”
“We’re building on decades of investment and innovation, scrupulously complying with all laws, making NVIDIA openly available in every cloud and on-prem for every business, and ensuring customers can choose whichever solution is best for them,” the spokesperson said.
The spokesperson added that Nvidia “is happy to provide any information required by regulators.”
CNBC also reached out to the Department of Justice for the report.
Samsung rival SK Hynix, which supplies US giant Nvidia, also fell sharply to close more than 10 percent lower. The sell-off continued in Europe. Shares of ASMLwhich sells key tools needed to build cutting-edge chips, dropped along with STMicroelectronics and Infineon.
The VanEck Semiconductor ETF, which includes major names in the industry, fell more than 4% on Friday, after plummeting 6.5% a day earlier.
I’M WATCHING: Because Intel faces a tough road ahead