Investors are hopeful that the new CEO can turn the struggling chipmaker around.
Intel (NASDAQ:INTC) stock was soaring on Thursday after the struggling chipmaker named a new CEO, Lip-Bu Tan.
Intel stock was surging some 15% higher on Thursday morning, as investors are hopeful that Tan can turn around the flagging fortunes of the semiconductor pioneer, which created the first microchip back in 1971.
Intel has struggled in recent years. While it is still the leader in designing and manufacturing central processing units (CPUs) for personal computers, it has steadily lost market share to AMD and other competitors. It is also way behind NVIDIA and AMD in the graphics processing units (GPUs) market, with only a very small share of that lucrative business, which has been driven by AI and the need for AI chips.
As a result, Intel was the worst performing stock on the Dow Jones until it got bounced from the Dow for NVIDIA last November. It is the worst performer on the Nasdaq 100 over the past 12 months, with the stock down 53%. It is also among the 10 worst performers on the S&P 500 over that stretch.
So far this year, Intel stock is in the green, up 19% YTD, buoyed by Thursday’s 15% surge to $24 per share. But can the new CEO keep the momentum going?
A history with Intel
Tan was formerly the CEO of Cadence Design Systems, a company that provided design software for the semiconductor industry. During his stint there as CEO from 2009 to 2021, he transformed the culture around customer-centric innovation, doubled its revenue, expanded operating margins, and drove the stock price from about $5 per share to appreciate some 3,200%. After serving as CEO, was the executive chair at Cadence.
At Intel, he replaces Pat Gelsinger, who retired in December, and interim CEOs David Zinsner and Michelle Johnston.
“I have tremendous respect and admiration for this iconic company, and I see significant opportunities to remake our business in ways that serve our customers better and create value for our shareholders,” Tan said. “Intel has a powerful and differentiated computing platform, a vast customer installed base and a robust manufacturing footprint that is getting stronger by the day as we rebuild our process technology roadmap.”
Tan does have a past connection to Intel. He served on the Intel board from 2022 through August of 2024, when he resigned. Tan cited constraints on his time, but several news outlets reported at the time said his departure was over clashes with the former CEO and other board members about the direction of the company and its turnaround plan.
According to Reuters and CRN, it was over Intel’s “bloated workforce, risk-averse culture and lagging [AI] strategy.”
Obviously, there were board members who agreed with Tan, as he now sits in the corner office with an opportunity to put his vision into action.
“Throughout his long and distinguished career, he has earned a reputation as an innovator who puts customers at the heart of everything he does, delivers differentiated solutions to win in the market and builds high-performance cultures to achieve success,” Intel executive chair Frank Yeary said. “Like many across the industry, I have worked closely with Lip-Bu in the past and have seen firsthand how his relentless attention to customers drives innovation and success.”
Deals in the works?
Part of Intel’s turnaround plan had been focused on its new Intel Foundry business, in which it sought to challenge the Foundry leader, Taiwan Semiconductor (NYSE:TSM). A semiconductor foundry manufactures chips from other chip designers. Intel designs its own chip, but the foundry is a separate business.
With the news of Tan’s hiring, it was also reported this week by Reuters and other sources that Taiwan Semiconductor had approached NVIDIA, Broadcom, and AMD about a joint venture to run Intel’s foundry business.
Tan did not address these reports, but did say the firm would be engineering-focused.
“In areas where we are behind the competition, we need to take calculated risks to disrupt and leapfrog. And in areas where our progress has been slower than expected, we need to find new ways to pick up the pace,” Tan said.
There is a lot of heavy lifting ahead for Tan and his team, but analysts were almost all bullish on the hire. Morgan Stanley called it a “good start,” while Stifel said it was a longer-term positive. Wells Fargo was also bullish on the hire, while Roth said Tan will “revitalize” the manufacturing process for the company, reported the Fly.
The stock price is still way overvalued with a P/E of over 80, and the turnaround will take time. Investors to be wise to watch where Intel settles after today’s surge, but then look for updates on the new CEO’s plans and any other reports.
