In the last two years, semiconductor companies and chipmakers were largely the biggest winners in the financial markets. The ongoing advancement and rapid expansion of artificial intelligence helped stocks like Nvidia (NASDAQ: NVDA) rapidly expand their market capitalizations — sometimes by a factor of 3 or 4.
One key business in the space hasn’t fared well at all, however — Intel (NASDAQ: INTC) is trading at prices far below those seen when the AI rally kicked off.
On a year-to-date (YTD) basis, the stock is down 56.14%. A large part of those losses — 15.45%, occurred over the last week — and 5.28% happened within a single day on December 5.
At press time, Intel stock was trading at $20.82.
Intel has had its fair share of issues — it seemingly never recovered from the supply chain disruptions caused by the COVID-19 pandemic. This was further exacerbated by increased competition, a slowdown in the PC market, and a string of disastrous earnings calls.
The company is arguably America’s only chance of bootstrapping a domestic chip manufacturing industry — as such, it has received lucrative government contracts, and is set to get roughly $8 billion in funding from the CHIPS Act. Even that might not prove to be enough — even taking all of those tailwinds into account, insiders have been dumping their INTC stock holdings, and Wall Street equity analysts continue to set ever-lower price targets.
So, what caused this latest, precipitous 5.% drop? On top of all of the issues that Intel is facing, on December 2, the company announced that chief executive officer (CEO) Pat Gelsinger had retired on December 1 following a meeting of the board of directors, as publicized in one of Intel’s Form 8-K filings.
Intel stock drops on uncertainty
CEO departures, especially abrupt and unexpected ones, tend to cause stocks to drop. Intel stock saw a notable uptick in the immediate aftermath of the announcement. It came as little surprise — after all, Gelsinger had presided over the business during a period of extended underperformance.
This initial optimism was quickly squashed — for one, it became apparent to investors that this was likely not planned in advance. In August, Gelsinger announced a massive restructuring plan — of a sort that isn’t undertaken four months before retiring. Secondly, there doesn’t seem to be a clear replacement plan.
Michelle Johnston Holthaus and David Zinsner have been named as interim co-CEOs — however, the business is apparently scrambling to find a replacement, as it has contacted former Intel board member and CEO of Cadence Design Systems (NASDAQ: CDNS) Lip-Bu Tan, several executives from Taiwan Semiconductor Manufacturing (NYSE: TSM), and Matt Murphy, the CEO of Marvell Technology (NASDAQ: MRVL) in the search for a replacement.
To make matters worse, co-CEO Zinsner, who also serves as chief financial officer (CFO), held an investor presentation on December 4. No concrete plans for the utilization of CHIPS Act funds were presented. It was also revealed that the company’s highly-anticipated 18A node technology had hit a snag in terms of progress. The production ramp for the product has been postponed to the second half of 2025 — while yields are reportedly at a dismal 10%.
Intel stock is unlikely to recover in the short to medium term — there are no easy or quick fixes for issues of this extent. With the exception of those who have an extremely long time horizon and see a case for INTC shares as a value play, investors would most likely be wise to turn their attention to other semiconductor stocks.
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