Get ready! Intel shares hit 10-year low, worst day on Wall Street in half a century

Intel shares fell 26% to $21.48, the lowest share price since 2013, bringing its market capitalization below the $100 billion mark. This followed the company’s disappointing earnings report and the announcement of an extensive restructuring plan.

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The Intel disaster directly affected the semiconductor industry worldwide, affecting Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. TSMC, the world’s largest chipmaker, fell 4.6 percent in Taiwan. In South Korea, the world’s largest memory semiconductor maker, Samsung Electronics fell more than 4 percent. The effects trickled down to the Nasdaq composite, which fell 2.4 percent, most of it lost to Intel’s collapse.

Intel’s latest quarterly financials were grim. The net loss was $1.61 billion, compared to a net income of $1.48 billion in the same period last year. Adjusted earnings per share were two cents, much worse than the 10 cents analysts had forecast, according to LSEG data. Revenue also missed forecasts, deepening the company’s financial woes.

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In response, Intel announced some drastic measures. It will suspend its dividend payments for the fourth quarter of 2024, cut its full-year capital spending by more than 20% and cut more than 15% of its workforce as part of its cost-cutting plan to 10 billion dollars.

This will be the biggest change in its organizational structure since Intel switched to memory microprocessors forty years ago. In an interview, a confident Gelsinger shared with CNBC’s Jon Fortt, “We’ve lined up a bold journey to rebuild this company, and we’re going to get it done.”

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Gelsinger also pointed to the decision to increase production of Core Ultra PC chips, tailored for AI workloads, as a factor in the financial loss. He told analysts on the call that he hadn’t expected this kind of competitive pricing environment this quarter, with AMD and Qualcomm being much more aggressive than he had anticipated.

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The company also announced job cuts in what could be one of the biggest layoffs in recent tech industry history. This was communicated in a company-wide memo from Gelsinger. Making matters worse for the semiconductor industry, the Justice Department has begun an antitrust investigation into AI chip leader Nvidia. The department is investigating allegations that Nvidia abused its market dominance in AI.

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Nvidia, however, has strongly denied any wrongdoing. A company representative emphasized: “We compete on a decade’s worth of investment and innovation, scrupulously complying with all laws, making NVIDIA openly available in every cloud and on-prem for every enterprise, and ensuring that customers can choose whatever solution it is. the best for them.” He added: “We are happy to provide any information that regulators require.”

Those shockwaves were felt in Europe on Friday, where shares of major semiconductor firms – including ASML, STMicroelectronics and Infineon – fell. The VanEck Semiconductor ETF, which includes key players, fell 5.5% on Friday, adding to the previous day’s 6.5% decline.

This is the biggest challenge Intel has ever faced, with the entire industry on the brink of potential disruption.

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