TLDR
- New CEO Lip-Bu Tan started his role Tuesday after his appointment sparked a 24% stock rally
- Tan warned employees of challenges ahead but hasn’t specified his turnaround strategy
- Intel shares added $22 billion in market value since the announcement last Wednesday
- Analysts question whether Tan will split Intel’s foundry business from its chip-design arm
- Tan is reportedly considering significant changes to manufacturing processes and AI strategies
Intel’s stock has surged 24% since the announcement of Lip-Bu Tan as its new CEO last week, adding $22 billion to the company’s market value. Tan officially took over the helm on Tuesday, facing immediate pressure to deliver results at the struggling chipmaker.
The former Cadence Design Systems CEO has stepped into a challenging role. Intel has fallen far from its glory days as the semiconductor industry’s giant.
The stock is down about 60% from its peak in early 2000. This represents more than $330 billion in lost market value for investors.
Intel’s struggles have been closely tied to its inability to compete in the AI chip market. The company has faced significant headwinds against competitors like Taiwan Semiconductor Manufacturing Co.
Tan sent a letter to employees ahead of his first day, warning that the company’s turnaround wouldn’t be easy. He promised to re-establish Intel as a “world-class foundry” for chips.
However, he didn’t specify how he plans to tackle Intel’s problems. This has left analysts wondering about his strategic direction.
Many on Wall Street want Tan to break up Intel and sell it off for parts. Others question whether he’ll pursue a modified version of his predecessor’s internal turnaround strategy.
According to Reuters, Tan is considering significant changes to Intel’s chip manufacturing methods and artificial intelligence strategies. Revamping manufacturing operations appears to be a key priority.
There are also reports that Taiwan Semiconductor might help operate some of Intel’s US factories at the request of the Trump administration. Tan has not addressed these reports yet.
Investors are seeking leadership
The optimism surrounding Tan’s appointment reflects how investors are seeking new leadership after Pat Gelsinger’s unsuccessful tenure. Gelsinger retired late last year after failing to turn around the company.
Under Gelsinger, Intel’s artificial intelligence business struggled to compete globally. The company has consistently disappointed investors with weak financial forecasts.
In late January, Intel provided a revenue forecast that was weaker than expected. This continues a pattern of disappointing reports, with only one of the past five quarterly reports being met with a positive market reaction.
Financial estimates have been repeatedly cut. Analysts now expect a net loss of 28 cents per share in 2025, down from earnings estimates of roughly 12 cents per share three months ago.
Revenue projections have dropped more than 4% over the same period. Less than 10% of analysts tracked by Bloomberg recommend buying Intel stock.
The stock’s recommendation consensus is among the worst in the Philadelphia Stock Exchange Semiconductor Index (SOX). Intel trades about 5% above the average analyst price target, indicating the worst implied return among chipmakers over the coming year.
The stock was Monday’s biggest gainer on the Nasdaq
Despite these challenges, Intel shares rose an additional 1% in premarket trading on Tuesday after gaining nearly 7% on Monday.
Joe Tigay, portfolio manager of the Rational Equity Armor Fund, described this as a “show me” moment for Intel. “We’re going to need to see some improvement in their product in order for it to get back to where it once was.”
Bank of America upgraded the stock following Tan’s appointment, writing that Intel “has a greater opportunity to restructure/turn things around” under his leadership.
Randy Hare, director of equity research at Huntington National Bank, is watching the $19 level as critical support for the stock, which last closed at $25.69.
“If Intel cuts its outlook and sets out a plan for growth, I would view it as a buying opportunity if the stock fell under $19 in that scenario,” Hare said.
The broader semiconductor industry has also faced challenges recently. The Philadelphia semiconductor index is down 21% from its peak last July amid macroeconomic uncertainty and questions about future demand for AI chips.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
