Intel cuts 15,000 jobs amidst massive shares losses

The announcement came after Intel reported a disappointing second quarter with a net loss of $1.6 billion, compared to a $1.5 billion profit in the same period the previous year. Revenue declined slightly to $12.8 billion. The company's stock plunged more than 20% following the news, exacerbating concerns about its financial health and future performance. This comes as a suprise, considering Intel is one of the faces of the recent U.S. Chips Act. 

Pat Gelsinger, Intel’s CEO, wrote in a staff memo: "Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI."

In response to these challenges, Gelsinger stated the necessity for "bolder actions" to fundamentally change how the company operates. As part of these measures, Intel suspended its dividend payments and outlined significant cuts in both operating and capital spending. These steps were seen as crucial to achieving a sustainable business model and supporting long-term strategy​.

The news also had broader market implications. It contributed to a sharp fall in Asian stock markets, with Japan's Nikkei share index dropping 5.8%, marking its largest percentage fall since the start of the pandemic in March 2020. US markets also reacted negatively, with the three major share indexes closing lower and significant companies like Amazon experiencing continued declines in after-hours trading​.

Despite the challenging outlook for Intel, there was positive news from other tech giants. Apple reported a rebound in sales, with revenues reaching $85.8 billion in the three months to June, up 5% year-on-year. This growth was driven by increased sales of Macs and iPads, and a record revenue from its services division. Apple remained optimistic about the potential of AI, investing significantly in this technology to enhance its product offerings.

"We remain incredibly optimistic about the possibilities of AI and we will continue to make significant investments in this technology," said Apple's CEO, Tim Cook.

Comparing Intel with its competitors

Intel's recent struggles highlight the company's shifting position within the highly competitive semiconductor industry. Once a dominant force, Intel has found itself outpaced by rivals like Nvidia and AMD, who have capitalised on emerging trends and new technologies.

Nvidia has positioned itself at the forefront of the AI revolution, a market that Intel has been slow to penetrate. Nvidia's GPUs (Graphics Processing Units) have become essential for AI applications, including deep learning and data analytics. This focus has propelled Nvidia's market value and reputation, establishing it as a leader in AI hardware. Nvidia's strategic investments and product innovations have allowed it to capture significant market share, particularly in data centres and high-performance computing​​.

AMD has also made substantial gains against Intel, particularly in the CPU (Central Processing Unit) market. AMD's Ryzen and EPYC processors have gained popularity due to their performance and competitive pricing. These products have enabled AMD to secure contracts with major data centres and gaming companies, sectors where Intel once held a dominant position. AMD's technological advancements and aggressive pricing strategy have eroded Intel's market share in both consumer and enterprise segments​​.

Technological innovations

Nvidia's innovations in AI and GPU technology have been a key differentiator. The company has focused on developing hardware that supports advanced AI applications, from autonomous vehicles to sophisticated data analysis tools. AMD has pushed forward with advancements in CPU architecture, offering high-performance, energy-efficient processors that appeal to a broad range of customers, from gamers to data centres​​.

Intel, meanwhile, has been criticised for its slow response to these market shifts. While it has made strides in developing its AI and data centre capabilities, these efforts have not yet matched the pace set by its competitors. Intel's focus on traditional PC markets has also left it vulnerable as mobile and cloud computing have gained prominence​​.

Strategic initiatives

Both Nvidia and AMD have implemented strategic initiatives that have enhanced their market positions. Nvidia's acquisition strategy, including its attempted purchase of ARM, highlights its ambition to dominate the semiconductor landscape. Although the ARM deal faced regulatory hurdles, it underscored Nvidia's aggressive expansion plans. AMD's focus on innovation and partnerships, such as its collaboration with major Cloud providers, has strengthened its competitive edge​.

Intel's IDM 2.0 strategy aims to transform the company into a contract manufacturer for other chip designers. This move, while ambitious, faces significant challenges, including the high costs associated with building and maintaining cutting-edge manufacturing facilities. Nonetheless, Intel hopes this strategy will position it as a key player in the global semiconductor supply chain, providing an alternative to industry leader TSMC.

Intel's competitors have leveraged emerging technologies and strategic initiatives to gain significant market advantages. Nvidia's leadership in AI and AMD's advancements in CPU technology exemplify the dynamic and rapidly evolving nature of the semiconductor industry. Intel's restructuring and strategic shifts are critical as it seeks to regain its footing and compete effectively in this competitive landscape.