The giant will lay off 15,000 employees. Intel wants to save the business. The stock price has plunged

First, during the Wall Street session, Intel fell by 5.5%. Later, in after-hours trading, the price simply collapsed – by over 19%. This is a reaction to several pieces of disappointing news for investors.

Intel drastically cuts costs

The tech giant has announced a drastic cost-cutting plan. It assumes laying off 15 percent of its employees, which means that the company will say goodbye to over 15,000 people. Most of them will lose their jobs this year. Intel was already implementing a savings program, and now it has been expanded by an additional $10 billion, and layoffs are part of it. In addition, investment expenditures are to be about 20 percent lower than previously planned, and the company will also suspend dividend payments (which investors also cannot like, as in April it promised 12.5 cents per share).

All this to save its weakening finances. Intel announced that it expects third-quarter revenues of $12.5 billion to $13.5 billion – the average analyst expectation was $14.35 billion. And here we have a disappointment.

Not everyone can play chips

Intel is the largest semiconductor manufacturer in the United States and one of the largest such companies in the world (although it also produces many other types of equipment, including the most recognizable among ordinary users are computer processors). In recent years, however, it has been overtaken in the chip market by competition from Asia, which is developing strongly thanks to the artificial intelligence (AI) boom. Intel’s CEO admitted that potential customers are spending money on AI chips, such as those from Nvidia, instead of data centers. Intel is also having trouble producing its new Meteor Lake processors.

Intel is fighting to regain its technological edge and build its AI chip expertise. It’s a tough road for now. Since the beginning of the year, Intel has lost over 42% on the stock market (excluding the decline in after-hours trading mentioned at the beginning).

And the fleeing competition is not everything. Intel has a huge problem with faulty 13th and 14th generation desktop processors. They are unstable (due to increased voltage) and the company, although initially announcing work on finding the source of the problem and its elimination, now seems to be accepting that the freezing processors cannot be repaired and the only solution to the problem is to replace them. Intel announced an extension of the warranty period for this equipment by two years, i.e. to five years.

Politics in the background

In March of this year, Intel received a promise of up to $8.5 billion in direct funding from the US government. The massive subsidy is to be provided under the so-called CHIPS Act. This is a law passed in 2022 that is to support chip production in the US. In addition, Intel can count on up to $11 billion in loans.