Intel shares dropped 6% on Tuesday, following the company’s announcement of CEO Pat Gelsinger’s departure. Gelsinger, who led the company for four years, faced mounting challenges during his tenure, including declining market share and struggles in artificial intelligence. The stock’s performance marked its worst day since early September, further deepening its losses, with shares down more than 50% this year.
Interim Leadership Steps In
The company stated on Monday that CFO David Zinsner and Intel Products CEO MJ Holthaus would take over as interim co-CEOs while the board and a search committee work to find a permanent replacement. Additionally, longtime board member Frank Yeary has been appointed as interim executive chair.
The leadership shuffle comes as Intel grapples with significant internal and market pressures, with analysts expressing skepticism about whether a single leader can turn the situation around. Intel’s declining performance has been attributed to broader industry challenges and strategic missteps rather than the actions of one individual.
Financial Challenges and Market Competition
Intel has faced steep revenue declines, dropping 6% in its most recent quarter and marking nine year-over-year declines in the last 11 quarters, leading to growing concerns about Intel shares among investors. This financial erosion has occurred as competitors like Nvidia dominate the booming artificial intelligence market. Nvidia has surged past a $3 trillion market cap and has become a key supplier of graphics processing units to major tech companies, including Amazon, Meta, and Alphabet.
Under Gelsinger’s leadership, Intel has struggled to keep pace with rivals. While Nvidia’s market dominance has grown, Intel has also lost market share in its core PC and data center businesses to Advanced Micro Devices (AMD).
At the same time, Intel has shifted its focus toward becoming a foundry, manufacturing chips for other companies. While this transition aims to diversify revenue streams, it has proven costly. The foundry business, which Intel announced in September would eventually become an independent subsidiary to raise outside funding, has faced criticism for its financial impact.
Pressure from Analysts
Analysts have pointed to Intel’s insistence on the foundry business as a significant factor contributing to recent challenges. Chris Danely, an analyst at Citi Research, highlighted that the foundry initiative has caused substantial margin shrinkage, leading to billions of dollars in losses every quarter. He noted that Gelsinger’s leadership faced increased scrutiny when the financial strain from the foundry business became apparent over the summer.
Intel’s fiscal second-quarter earnings report in August further underscored the company’s difficulties. Following the report, Intel Shares plummeted 26%, marking its steepest one-day decline in 50 years. In response, Gelsinger announced a series of cost-cutting measures, including a 15% workforce reduction as part of a $10 billion cost-saving plan.
Future Cost-Cutting and Strategic Changes
Analysts suggest that Gelsinger’s successor may need to implement even more aggressive cost-cutting strategies and expedite the sale of non-core assets. However, these measures alone may not address Intel’s core issues. The foundry business, which lacks high-volume external customers, remains a significant hurdle for the company’s turnaround efforts.
Intel’s future depends on finding a leader capable of navigating these challenges while re-establishing its position in a competitive semiconductor market. With interim leadership in place, the search for a permanent CEO is expected to be a critical step toward stabilizing the company, restoring investor confidence, and potentially boosting Intel shares.
