Intel soars as investors cheer appointment of new CEO

New York — Intel shares surged almost 15% on Thursday as Wall Street cheered its decision to name former board member Lip-Bu Tan as CEO after several years of market underperformance.

Tan, who left in August over differences about the chipmaker’s direction, will be tasked with reviving the company’s fortunes after it missed out on the AI-driven semiconductor boom while plowing billions of dollars into building its chip-making business.

Intel has posted several quarters of market share losses in data centres and PCs, as well as billion-dollar losses in its manufacturing business. Over the past five years the stock has lost about 60% of its value, a period when the Nasdaq Composite Index and S&P 500 have more than doubled.

“Tan in as CEO at Intel was as good as stakeholders could have hoped for," said TD Cowen analysts, noting that he has “deep relationships” across the chip ecosystem that could draw customers to the company’s contract manufacturing business.

Tan will take the helm next week — three months after Intel ousted CEO Pat Gelsinger. Tan had been brought onto the board two years earlier to help turn the company around, but left due to disagreements over the size of the company’s workforce and its culture.

Scepticism about Intel’s future has deepened in recent months after reports that rivals, including Broadcom, were evaluating the chip design and marketing business, while TSMC has separately studied controlling some or all of its plants.

Analysts expect Tan to follow Gelsinger in keeping the chip design and manufacturing operations together — a plan that Tan hinted at in a letter to employees by vowing to make Intel a top foundry, an industry term for a contract chip manufacturer.

Some analysts have said the foundry business may find it difficult to draw orders from chip designers wary of entrusting production to a rival.

But Tan, who oversaw more than a decade of strong growth at Intel supplier and chip-design software Cadence Design Systems, enjoys strong credibility as a “neutral party” who could help Intel overcome some of the challenges, analysts said.

Stacy Rasgon of Bernstein also said Tan’s previous two-year tenure on the Intel board would aid his efforts.

That “should have given him a pretty good idea of where all the bodies are buried, and he should be more realistic in his evaluations and outlook than prior leadership (it was unbridled optimism proved to be Pat's undoing),” Rasgon said.

Still, any turnaround is expected to take years, as hinted by Tan in his letter to employees.

Intel’s market value has remained stuck below $100bn for the first time in three decades after shares slumped 60% last year and its Gaudi AI chips have also missed sales targets.

More analysts recommend investors sell the stock than buy it, with most having a hold rating, LSEG data shows.

Rasgon said Tan “has a big job in front of him and a lot of wood to chop, though it does seem increasingly likely something will have to change giving investors something more concrete to play for (and if he fails, it was probably unfixable).”

Reuters