Intel’s stock drops 30% overnight —company sheds $39 billion in market cap

Intel’s stock dropped around 30% overnight, shaving some $39 billion from the company’s market capitalization since rumors of a pending layoff emerged. 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.  

Intel’s market capitalization was $130.86 billion when the NYSE closed on July 31. 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, 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,,” Stacy Rasgon, an analyst with Bernstein, told Reuters. 

Indeed. Intel is fighting against numerous rivals. On the one hand, it is competing against AMD, Nvidia, and now Qualcomm for a place and revenue share on the market of client computers. For now, Intel outsells all three companies easily on this market, though Nvidia’s gaming business looks to be more profitable. On the other hand, the company is rivaling against AMD and Nvidia in the datacenter space and thanks to the latter’s highly-popular AI GPUs, Nvidia outsells AMD and Intel combined by nearly 3.3 times. But arguably the biggest fight that Intel is fighting is against TSMC, which makes chips for all of Intel’s rivals and Intel itself and makes a profit, unlike the blue giant. 

On the roadmap side of things, 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, something that is not easy given that the Taiwan foundry can 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 profit, the company’s Intel Foundry manufacturing arm lost some $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.