Intel Shares Drop 28%, Facing Biggest Loss Ever as Challenges Grow

Intel’s stock dropped by 28% on Friday, which could be its worst selloff ever. The company paused its dividend and announced major job cuts to fund its costly efforts to turn around its chip-making business. This move erased about $35 billion in Intel’s market value.

Intel’s revenue forecast fell short of expectations, and the company plans to cut 15% of its workforce. These actions raised concerns about Intel’s ability to compete with other chipmakers like Taiwan’s TSMC.

Bernstein analyst Stacy Rasgon said Intel’s problems are becoming critical. However, he mentioned that Intel might add $40 billion to its cash reserves by 2025 through these changes, along with subsidies and partner contributions.

Other chip companies’ shares also fell, including Arm, Micron Technology, GlobalFoundries, and U.S.-listed shares of TSMC. Nvidia’s shares were down 2% following news of a U.S. Department of Justice investigation.

Intel’s History and Challenges:

• Intel was once the top chipmaker in the world, famous for its “Intel Inside” logo.
• In the 1980s and 90s, it was one of the tech industry’s Four Horsemen, alongside Cisco Systems, Microsoft, and Dell.
• Intel’s market value peaked at nearly $500 billion in 2000 but has struggled since.
• The rise of mobile devices like Apple’s iPhone in 2007 challenged Intel’s dominance.

If Friday’s losses hold, Intel’s market value will drop to about $90 billion. This is less than 5% of Nvidia’s value and about 40% of Advanced Micro Devices’ (AMD) value, companies Intel used to dominate.

Impact on Intel:

• Intel will be worth less than companies like Applied Materials and Lam Research, which supply equipment for Intel’s factories.
• Eliminating the dividend may hurt Intel’s share price, as it will be excluded from ETFs, indices, and funds that include only dividend-paying stocks.

Intel’s server chip business has been struggling as companies focus on AI chips, where Nvidia leads. To regain its edge, Intel plans to spend $100 billion to build and expand factories in the U.S., funded partly by $19.5 billion in federal grants and loans.

Intel hopes to attract other companies to use its manufacturing services, but this effort may take years and is currently increasing costs and pressuring profit margins.

At least 14 analysts lowered their price target for Intel’s stock, with the median target now at $28. Intel’s shares were trading at an 11-year low of $20.6 on Friday.

The stock has a 12-month forward price-to-earnings ratio of 18.62, compared to Nvidia’s 32.15 and AMD’s 29.42.