Intel was once an unstoppable force in technology, one half of the “Wintel” (Microsoft/Intel) juggernaut that dominated the IT industry for decades.
That’s no longer true — and Intel has found itself besieged.
Last Friday, Intel shares tanked 26% — their biggest one-day decline since the dot-com bubble burst 24 years ago. The bloodbath came after the storied Silicon Valley chip company — founded by Gordon Moore and Robert Noyce, and once known as Chipzilla because of its scale — announced swingeing job cuts, a suspension of its dividend and other sweeping cost-cutting measures.
Intel should have been thriving in 2024. Advanced semiconductors have never been in higher demand, thanks to cloud computing giants’ insatiable demand for chips designed for AI workloads. But like the smartphone boom before it, Intel is watching the AI party from the sidelines while rival Nvidia has the time of its life.
Intel’s decline is, in large part, a tale of hubris. The world shifted, and Intel failed to shift with it. Now Pat Gelsinger, Intel’s former technology chief who resigned in 2009 after being overlooked for the top job, has the unenviable task of trying to save the stumbling giant. Most people still believe Gelsinger — a brilliant technologist who returned to Intel as CEO in 2021 — is the right man for the job, but last Friday’s share price crash shows that even he is struggling with the size of the task.
To put the scale of Intel’s troubles into perspective, consider that:
- Its share price is now at about the same level it was in 1997, before the dot-com bubble inflated, sending its shares to a record high in mid-2000 (a level which, unlike many of its peers in tech, it never reached again).
- At the bubble-fuelled 2000 peak, its market capitalisation topped out just shy of half a trillion dollars, making it one of the most valuable companies in the world at the time. As of last Friday’s close, that figure was just $91bn.
- Nvidia, which started by making accelerated graphics chips for video games, is now worth almost $2.7-trillion — or 29 times as much as Intel, driven higher by demand for AI applications, which its graphics chips, or GPUs, were adept at. At the height of Covid just four years ago, Nvidia’s market cap exceeded Intel’s for the first time. Now it’s nearly 30 times larger.
- Even chipmaker AMD, which has historically operated in Intel’s shadow, has a valuation of more than double that of its rival.
Intel’s troubles can be tied back directly to the appointment of a series of CEOs who lacked the deep technical nous to steer a highly complex company through an era of significant change, first as it tried and failed to capture a slice of the smartphone processor market and then as it simply sat out the AI boom.
Intel’s dominance in PCs is under attack from Qualcomm and others that see the same low-powered processors used in smartphones displacing Intel’s less power-efficient chips
It is now facing a third crisis, this one potentially existential; the PC processor market it has dominated since the 1980s is under threat from the same chip architectures used in smartphones: silicon built using designs licensed from the UK’s Arm Holdings and manufactured at scale in Taiwan.
Intel tried but failed hopelessly to establish itself in smartphones, leaving hungrier rivals such as Qualcomm to dominate. Qualcomm, whose market cap is about twice that of Intel, doesn’t manufacture any of its own chips, preferring to work with partners such as the Taiwan Semiconductor Manufacturing Co, or TSMC (whose worth exceeds that of Intel by more than eight times). Nvidia and AMD have a similar “fabless” strategy, meaning they don’t operate any of their own fabs, or chip plants, because of the high costs and risks involved.
Intel under Gelsinger, on the other hand, has doubled down on fabs, and wants Intel to take on TSMC at its own game by becoming a contract chip manufacturer itself. It’s a risky strategy for a company that has historically built fabs for making only its own chips.
Even as Intel tries to recalibrate under Gelsinger, another threat is looming: its dominance in PCs is under attack from Qualcomm and others that see the same low-powered processors used in smartphones displacing Intel’s less power-efficient chips, first in laptops and later in more powerful desktop PCs.
Apple, which pivoted its Mac lineup away from Intel to its own Arm-based designs, has proved that smartphone architectures can run high-end desktop computing tasks while consuming significantly less electricity. Microsoft, Intel’s ally for years, is retooling Windows to run on these Arm-based chips.
Suddenly, everything is to play for. And if Intel fails to defend its core business, all bets are off.
McLeod is editor of TechCentral
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