Intel's stock dropped around 30% overnight, shaving some $39 billion from the company's market capitalization since rumors of a pending layoff first emerged. The devastating results come after the chip giant reported a loss for the second quarter, complained about yield issues with the Meteor Lake CPU, provided a modest business outlook for the next few quarters, and announced plans to lay off 15,000 people worldwide.
When the NYSE closed on July 31, Intel's market capitalization was $130.86 billion. Then, a report about Intel's massive layoffs was published, and the company's market capitalization dropped sharply to $123.96 billion on August 1. Following Intel's financial report yesterday, the company's capitalization dropped to $91.86 billion. Essentially, Intel has lost half of its capitalization since January. As of now, Intel's market value is a fraction of Nvidia's worth and less than half of AMD's.
As Intel's actions look rather desperate, analysts believe that Intel's challenges are existential. "Intel's issues are now approaching the existential," said Stacy Rasgon, an analyst with Bernstein, told Reuters.
Indeed. Intel is fighting numerous rivals. On the one side, it is competing against AMD, Nvidia, and now Qualcomm for revenue share in the consumer PC market. For now, Intel outsells all three companies easily in this market, though Nvidia's gaming business looks to be more profitable.
On the other side, the company competes against AMD, Nvidia, and Arm chips in the data center space. Thanks to Nvidia's highly popular AI GPUs, Nvidia outsells AMD and Intel combined by nearly 3.3 times. But TSMC is arguably the biggest fight for Intel. The Taiwanese company makes chips for all of Intel's rivals and Intel itself.
On the roadmap side, Intel looks quite competitive both in terms of performance and, eventually, in terms of costs. Yet, the company has to prove that it can make money making chips not only for itself, but for others. To do so, it needs to persuade TSMC's customers to use Intel's technologies, which isn't easy given that the Taiwan foundry can efficiently produce chips with great yields.
Rasgon believes that under different circumstances, there might be discussions about the company's viability. However, Intel could boost its balance sheet by $40 billion by 2025 through its current actions, subsidies, and partner contributions, ensuring its survival in some form.
"Intel will survive (in some form) to continue the fight," Rasgon told Reuters.
Intel reported $12.8 billion in revenue for Q2 2024 and faced a substantial loss of $1.6 billion, a significant drop from a $1.5 billion profit in Q2 2023.
Looking ahead, Intel's projections for the third quarter of 2024 are concerning. The company anticipates revenue between $12.5 billion and $13.5 billion, which would be approximately $1.2 billion less than the revenue reported in Q3 2023 and just a bit higher at the midpoint than in Q2 2024. Although the company's product divisions make a profit, the company's Intel Foundry manufacturing arm lost $2.8 billion in the second quarter alone. As the company does not expect a rapid recovery, it decided to lay off some 15,000 personnel to reduce its costs.
