Intel reported a historic loss of $16.6 billion in a single quarter, significantly exceeding previous records and analysts’ estimates. Despite this, investor confidence surged, boosting shares by 8% the following day. Much of the loss stemmed from massive write-offs after the abrupt end of a pandemic-related PC sales boom. CEO Patrick Gelsinger acknowledged failures in adapting to new technologies, especially in AI, as competitors like Nvidia advanced. Intel faces ongoing struggles, including a steep decline in market value and substantial job cuts, while attempting to reposition itself amidst government support efforts.
The American semiconductor manufacturer Intel reported its worst quarterly results in history on Thursday evening, posting a net loss of $16.6 billion. This significantly exceeds its previous record loss of $2.8 billion. Analysts had anticipated a loss of just over $1 billion.
Despite the staggering numbers, investors reacted positively, as Intel’s stock rose by 8% on Friday. This seemingly contradictory response can be attributed to the considerable decline that the once-dominant technology firm has experienced in recent years.
Billion-Dollar Bet on PC Boom Fails
Billion-Dollar Bet on PC Boom Fails
The majority of Intel’s loss was not from operational activities but was driven by massive write-offs. During the pandemic, Intel enjoyed a surge in PC sales and heavily invested to enhance its home computer business. However, the PC boom came to a sudden halt, and it became increasingly clear that the associated risks would not yield returns.
Intel CEO Patrick Gelsinger stated in a meeting with analysts that the equipment purchased during that period cannot be repurposed for the production of cutting-edge chips.
Gelsinger’s admission signaled a failure that the markets had already anticipated; the shock was not the write-off itself but rather its timing. Friday’s stock increase can be attributed to Gelsinger’s comments indicating that the company is likely to perform better and generate higher revenue in the current quarter than investors expected.
However, this stock market recovery pales in comparison to the abysmal performance of Intel’s shares since the beginning of the year. Intel has lost more than half its market value since January, while its rival Nvidia’s stock has nearly tripled. With a market capitalization exceeding $3 trillion, Nvidia currently stands as the second-largest company globally, while Intel is valued at just under $100 billion.
This decline is ongoing. For a long period, Intel could take solace in its chips still being used in data centers and personal computers.
However, the company has failed to keep up with pivotal trends in the semiconductor industry: Intel has lost significant ground in the smartphone chip market. In 2020, Apple ended its long-standing partnership with Intel and began developing some of its computer chips in-house, manufacturing them through TSMC in Taiwan.
Nvidia Surpasses Intel
Nvidia Surpasses Intel
Additionally, Intel has not succeeded, despite years of efforts, in developing or producing AI-optimized computer chips that can compete with those made by Nvidia. Intel’s dominant position in the PC market, established in the 1980s, has turned into a disadvantage, as the extreme profitability of that sector led to a neglect of alternative technologies.
Based in Santa Clara, California, Intel has become an example of market economics, demonstrating that a market leader rarely can revolutionize an existing market through innovative advancements.
This role has been claimed by Nvidia, in collaboration with the foundry TSMC. Initially a niche provider of graphics cards primarily catering to gamers in the 2000s, Nvidia’s chips have proven well-suited for the substantial computational needs required for building AI models. For nearly two decades, Intel has been working on similar chips but has not prioritized this research appropriately.
Currently, Intel is in crisis mode, with its annual revenue dropping by 30% since 2021. Patrick Gelsinger, a long-standing member of Intel, has eliminated the dividend and recently laid off 15,000 employees as he attempts to reposition the company as a leading chip manufacturer. This is a lengthy undertaking. While Intel recently introduced a new AI-capable chip for laptops that piqued market interest, it is unable to produce it itself and must rely on services from its significant competitor, TSMC.
In September, rumors even circulated that Qualcomm, a semiconductor manufacturer specializing in mobile devices, might take over Intel. Although this seems unlikely today, the speculation has highlighted how far Intel has slipped in the industry hierarchy.
A Bit of Help from Washington
A Bit of Help from Washington
For the United States, which is engaged in a tense competition with China over the future of global semiconductor development and production, Intel’s decline is particularly painful. For half a century, Intel has been a cornerstone of American technological dominance, significantly advancing the miniaturization of semiconductors and the IT industry as a whole. Co-founder Gordon Moore famously proposed Moore’s Law, predicting that the performance of computer chips would double approximately every 18 months.
It is no coincidence that Intel plays a critical role in the industrial policy of the Biden administration. In 2022, Intel vigorously