Intel shares head for record 28% drop as struggle to recover deepens

Intel shares fell nearly 28% on Friday, looking set for their worst day on record, after the company suspended its dividend and cut jobs to fund costly changes to its chipmaking unit.

The company was expected to lose about $35 billion in market value as disappointing forecasts and a planned 15 percent job cut raised concerns about its ability to catch up with Taiwan’s TSMC and other chipmakers.

“In our view, Intel’s problems are approaching existential levels,” said Stacy Rasgon, an analyst at Bernstein.

He added that under different circumstances there would be “going concern” talks, but Intel could add $40 billion in cash to its balance sheet by the end of 2025 with these moves, as well as grants and partner contributions.

“Intel will survive (in some form) to continue the fight,” Rasgon said.

Shares of other chipmakers also fell, with Arm, Micron Technology, GlobalFoundries and U.S.-listed TSMC shares falling between 2.8% and 6.7%.

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Shares of Wall Street darling Nvidia fell 2% following the release of a report on an investigation by the U.S. Department of Justice.

“The Forgotten Rider”

Santa Clara-based Intel was once the world’s leading chipmaker, and its “Intel Inside” logo was a valuable marketing feature for personal computers in the 1980s and 1990s.

Part of the Four Horsemen of the dotcom era — along with Cisco Systems, Microsoft, and Dell — Intel’s market value peaked at nearly $500 billion in 2000 before plummeting later that year and never recovering.

It continued to dominate the market for large PC processors but was outclassed by the launch of Apple’s iPhone in 2007 and other mobile devices that required less power and cheaper processors.

If Friday’s losses continue, Intel’s market value would fall to about $90 billion, less than 5% of Nvidia’s value and about 40% of Advanced Micro Devices, two makers of PC chips that Intel dominated for decades until recently.

“The elimination of the dividend could put pressure on the stock price because it would exclude Intel from any ETF, index or fund strategy that only includes dividend-paying companies,” said Michael Schulman, chief investment officer at Running Point Capital.

“Intel has been one of the forgotten horsemen of technology over the past few decades. It has never surpassed its 2000 peaks and is struggling to get profits back to pre-AI revolution levels.”

The server chip business has been losing money for several years as companies prioritize AI chip investments. In that area, the company has fallen behind rival Nvidia, which has become one of the world’s most valuable companies thanks to growing demand for its processors.

To regain its manufacturing advantage, Intel plans to spend $100 billion to build and expand factories in four U.S. states, after securing $19.5 billion in federal grants and loans.

The company told investors on Thursday that it remains “pleased” with its CHIPS program plans.

The company’s restructuring plan depends on persuading outside companies to use its manufacturing services. But analysts say the push to revive the business could take years. For now, it’s driving up Intel’s costs and putting pressure on profit margins.

Intel’s unsecured bonds, which pay a 5.15% coupon and mature in 2024, were trading 20 basis points higher on Friday, well above those of other companies, according to traders. Its 5.6% unsecured bonds due in 2054 also widened by 17 basis points.

Bond market participants said the higher trading volume compared to other bonds was due to Intel’s latest earnings report.

“It’s weighing on the bond market,” said Dave Novosel, senior investment analyst at corporate bond research firm Gimme Credit. “They see they may have to go back to the market for a modest amount of debt.”

At least 14 analysts lowered their price targets for Intel shares, pushing the median PT down to $28. Shares were trading at $20.6 on Friday, the lowest in more than 11 years.

The stock’s trailing-12-month price-to-earnings ratio is 18.62, compared to 32.15 for Nvidia shares and 29.42 for AMD.