Intel Corporation experienced its most significant stock decline in 50 years on Friday, a fall not seen since the early 1970s. The stock plummeted 26% to close at $21.48, marking a dramatic drop that wiped out about $32 billion in market value. This downturn followed the company’s dismal earnings report and an announcement of a substantial restructuring plan.
The selloff in Intel’s shares also triggered a 2.4% decline in the Nasdaq and impacted global semiconductor stocks. Major players like Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics saw their shares fall by 4.6% and over 4%, respectively. The ripple effect underscored the significance of Intel’s struggles within the broader industry.
Intel’s quarterly performance was notably poor, swinging to a net loss of $1.61 billion from a net income of $1.48 billion in the same period the previous year. Adjusted earnings per share were a mere 2 cents, significantly below the 10 cents expected by analysts. Revenue also missed projections, adding to the bleak financial outlook.
In response to the disappointing results, Intel announced it would suspend dividend payments in the fourth quarter of 2024 and slash full-year capital expenditures by over 20%. The company also revealed plans to lay off more than 15% of its workforce, which amounts to around 15,000 employees, as part of a $10 billion cost-reduction initiative.
Intel’s Chief Executive Officer described the restructuring as the most substantial since the company’s transition from memory microprocessors four decades ago. The restructuring includes accelerating the production of Core Ultra PC chips designed for artificial intelligence workloads, a move that contributed to the quarterly loss. Increased competition from companies like AMD and Qualcomm has intensified pricing pressures, further challenging Intel’s market position.
The job cuts, set to be the largest single reduction in the company’s history, aim to streamline operations and speed up decision-making processes. The layoffs are expected to be completed by the end of the year.
Adding to the sector’s pressures, reports emerged of a U.S. Department of Justice antitrust investigation into AI chipmaker Nvidia, potentially complicating the competitive landscape for Intel and others.
The overall semiconductor market reacted negatively, with shares of key industry players like ASML, STMicroelectronics, and Infineon declining in Europe. The VanEck Semiconductor ETF, encompassing major names in the sector, dropped 5.5% on Friday after a 6.5% fall the previous day.
