Is A New CEO Enough To Get Intel Back On Track?
Intel stock (NASDAQ:INTC) surged by nearly 14% in Thursday’s trading after the struggling chipmaking giant appointed Lip-Bu Tan as its new CEO. Following the rally, Intel stock is up about 17% year-to-date, though it remains down over 60% from its 2021 highs. There’s good reason for the recent optimism. Tan was the former CEO of chip software maker Cadence Design Systems (NASDAQ: CDNS) and has a proven track record of creating shareholder value. For perspective, Cadence’s stock rose over 30x during his tenure. Wall Street, too, seems to be welcoming the leadership change.
Intel’s strategy under former CEO Pat Gelsinger focused on transforming the business via heavy investments in manufacturing. The company built out its foundry operations, producing chips for other companies in addition to its own. However, these efforts were highly capital-intensive. At the same time, Intel struggled to defend its market share in the CPU space against rivals like AMD and largely missed out on the generative AI boom and the consequent surge in demand for advanced graphics chips.
That said, Tan’s appointment marks a possible shift in strategy. He previously served on Intel’s board but resigned in August last year, reportedly due to disagreements over the company’s direction under Gelsinger. This suggests a possibility that Tan may take Intel in a new strategic direction.
Overall, there have been some encouraging signs for Intel of late. The company’s key manufacturing processes such as the 18A process have now reached crucial milestones. Intel’s latest PC and server chipsets have also received largely positive reviews. Moreover, Intel stands to benefit from the U.S. government’s support for domestic manufacturing. President Donald Trump has been a vocal advocate for boosting U.S.-based production and semiconductors, which are seen as being crucial to national security could be a priority. This should favor Intel given its sizable fabrication footprint in the United States.
At the same time, Intel has been the subject of acquisition speculation. In September, reports suggested that Qualcomm approached Intel for a potential takeover. More recently, The Wall Street Journal reported that Broadcom and Taiwan Semiconductor Manufacturing (TSMC) were exploring independent deals for different parts of Intel’s business. It remains to be seen how Tan will navigate these strategic options.
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