Intel’s stock fell by an astonishing 30% losing $39 billion in its market capitalization in a single night. It began with rumors of a massive layoff that spooked investors into fleeing from the company. Now, Intel’s market value is only a small fraction of what it used to be, and it seems like the tech giant is in some deep trouble.
Why Did Intel’s Stock Prices Fall
On July 31, The New York Stock Exchange was just about to shut down and Intel was with a market capitalization of $130.86 billion. Moving to August 1, that figure reduces to $123. $96 billion, all thanks to a report on upcoming layoffs. Then, after the financial report released by Intel yesterday, the value of the company decreased more to $91.86 billion. In a matter of months, Intel lost almost a third of its market value from early January!
Thus, why such a drop? The problems began when Intel posted a loss in the second quarter and shared that they encountered yield problems with their Meteor Lake CPU (It is Intel’s first Ultra mobile processor). Worse still, it provided a rather poor business forecast for the next few quarters and the decision to sack 15,000 employees globally, made the Intel investors rethink their investment.
Intel’s Growing Competition Might Also Be a Reason
Intel is keeping its options limited, but its competitors have tricks up their sleeves. On one side, there is AMD, Nvidia, and even Qualcomm fighting for a share in the consumer PC market. While Intel could still be winning in terms of total revenues, Nvidia’s gaming revenues are through the roof.
Meanwhile, in the data center space, the company is competing with AMD, Nvidia and Arm chips. Nvidia, with these dominating AI GPUs, sells more than AMD and Intel combined by an astounding 3.3 times.
But the primary competition is with TSMC; a Taiwanese based chip manufacturing giant. Essentially, TSMC manufactures chips for all Intel’s competitors.
How Will Intel Overcome Situation?
Still, the troubles have not made Intel want to quit the race just yet. It remains operationally competitive on performance and cost on a map for the company. But here’s the kicker: Intel also has to persuade customers of TSMC to dump its technology in favor of Intel’s technology.
Now, let me introduce you to some views from Analyst Stacy Rasgon from Bernstein regarding Intel. They think that in a different situation, people might be wondering whether Intel can survive or not. Nevertheless, Intel has a shot at enhancing its balance sheet by up to $40 billion by 2025 through its current actions, subsidies and partners.
A Glance on Intel’s Finances
Intel’s financial report for Q2 2024 painted a grim picture: Less than $12. 8 billion in operating revenue and $1.6 billion loss, a steep fall from the $1.5 billion profit they recorded in the Q2 of the year 2023.
Ahead, Intel forecasted revenue for the third quarter of the fiscal year 2024 to be between $12. 5 billion and $13.5 billion, about $1.2 billion down from Q3 of 2023.
However, their product divisions remain profitable while the Intel Foundry manufacturing segment let go of a jaw-dropping $2.8 billion in the second quarter of this year.
Further, aiming at reducing expenditures, the management decided to dismiss 15,000 people, which is the company’s decision to cope during the financial bad time..
