Intel, once the unchallenged leader in the semiconductor industry, has faced a significant downturn over the past few years with its share price declining from around $68 in April 2021 to around $19, currently. In 2024 alone, the share price has more than halved, falling 61%, making Intel one of the worst-performing Nasdaq stocks of the year.
From delays in innovation to missed market opportunities in booming space like Artificial Intelligence (AU) and fierce competition from the likes of Nvidia and AMD, Intel’s downfall has been a case study in how industry leaders can falter.
Why is Intel's share price falling?
Intel shares have been accelerating their decline in recent months amid concerns about its ability to engineer a turnaround after reporting losses in Q3 2024. Revenue: Intel’s revenue declined 6% year-on-year (YoY) to $13.28 billion and it registered a net loss of $16.99 billion, or $3.88 per share, compared with net earnings of $310 million, or 7 cents per share, in the same quarter a year ago.
The company has been in an extended slump due to market share losses in its core businesses and an inability to crack artificial intelligence space. The recent slump in Intel has fueled speculation that the stock may lose its place in the blue-chip Dow Jones Industrial Average (DJIA).
Why is Intel struggling despite being a legacy giant?
Intel's struggles began with its failure to capture the mobile phone boom early. In 2007, when Apple launched the iPhone, Intel turned down a deal to make iPhone processors because it did not stand to profit enough from the arrangement. Instead, Apple used chips based on designs from Arm Holdings, whose tech now dominates the mobile market.
A few years later, Intel made another mistake when it held back on using next-generation equipment used in the extreme ultraviolet lithography (EUV) technique, crucial for next-generation chips and focusing the company's engineers elsewhere. The decision sets back Intel's design and manufacturing businesses for roughly five years.
What further hit the chipmaker was its delayed transition to advanced manufacturing processes. While AMD adopted TSMC's 7nm technology in 2019, giving it a significant edge in performance and efficiency, Intel faced repeated delays in its own 7nm rollout, pushing it back to 2022-2023. This allowed AMD, with its innovative Zen architecture, to capture a larger share of the CPU market.
Simultaneously, Intel failed to capitalize on the booming mobile processor market. Competitors like Qualcomm and Apple surged ahead, leaving Intel largely sidelined in a segment that could have driven massive growth.
While Intel struggled, competitors AMD and NVIDIA capitalized on emerging trends. AMD's Ryzen processors became the go-to choice for gamers and professionals, offering high performance at competitive prices. By leveraging TSMC's advanced nodes and focusing on innovation, AMD grew its CPU market share from under 10% in 2016 to over 30% by 2024.
NVIDIA, on the other hand, revolutionized the GPU market and became the undisputed leader in AI hardware. With GPUs playing a critical role in AI and data center applications, NVIDIA dominated a space Intel was slow to enter. NVIDIA's market cap soared, surpassing $1 trillion, while Intel's stagnated and then fell.
Intel vs Nvidia vs AMD
| Revenue | PAT | OPM | |
| Intel | $54.247B | $15.961B | -3.52% |
| NVIDIA | $113.269B | $63.075B | 54.79% |
| AMD | $24.295B | $1.826B | 15.36% |
*Mcap as of January 9, 2025, Financials for 12 months ended September 30, 2024 |
Source: companiesmarketcap.com, Macrotrends
Intel lags behind Nvidia in AI and emerging technologies
The explosion of artificial intelligence (AI) highlighted Intel’s inability to pivot swiftly. NVIDIA’s GPUs became the backbone of AI advancements, and AMD made strides with AI-optimized CPUs. Intel’s late attempts to enter the AI space have yet to gain significant traction, leaving the company playing catch-up in a rapidly evolving industry.
Intel announced the launch of Xeon 6 server processors and Gaudi AI accelerators in 2024. The Xeon 6 processor is designed for compute-intensive tasks, such as AI applications in data centers, the cloud, and at the edge, while the Gaudi 3 AI accelerator is designed for large-scale generative AI. However, uptake of Gaudi has been slower than Intel anticipated and the company will not reach its $500 million revenue target for 2024.
Additionally, the chip giant's most advanced manufacturing process conducted by Broadcom failed recently, according to Reuters. Silicon wafers used for making chips were recently returned to Broadcom after being processed through Intel's 18A manufacturing technology. Broadcom's engineers reviewed the results and concluded that the process is not yet ready for large-scale production.
Analysts have warned that there could be an even greater crisis ahead for Intel if it misses on key parts of its plans to ramp up manufacturing capabilities.
What is Intel doing to regain lost ground?
The company is carrying out one of the most seminal restructuring processes since its establishment in 1968, according to former CEO Pat Gelsinger. As part of a cost reduction plan, Intel recognized $2.8 billion in restructuring charges during the quarter. There was also $15.9 billion in impairment charges tied in part to accelerated depreciation for Intel 7 process node manufacturing assets and goodwill impairment in the Mobileye unit.
Intel said in a filing that on October 28, 2024, that the company board’s audit and finance committee approved cost and capital reduction activities, including lowering head count by 16,500 employees and reducing its real estate footprint. The job cuts were originally announced in August. Restructuring should be done by the fourth quarter of 2025, Intel said.
Other cost-saving measures include lowering its research and development (R&D); marketing; and general and administrative spending to $20 billion in 2024, with further cuts in 2025 and 2026. The company also said it would suspend its dividend. By implementing spending reductions, Intel is taking proactive steps to improve profits and strengthen its balance sheet, said CFO David Zinsner.
Conclusion: Can Intel bounce back?
Intel may not be out of the game just yet as the company has already announced plans to invest heavily in its manufacturing capabilities, including a $20 billion initiative to build cutting-edge fabs. Intel’s new leadership has also promised a renewed focus on innovation.
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