Intel Corporation’s decision to part ways with CEO Pat Gelsinger has further unsettled a company already grappling with significant challenges in 2023. The sudden leadership change, coupled with poor stock performance and strategic struggles, has left investors and analysts questioning the company’s direction.
A Tumultuous Year for Intel
Intel’s shares are down 58% this year, marking their worst annual performance since 1983. The latest blow came with the announcement of Gelsinger’s departure, replaced by co-CEOs David Zinsner and Sandra Rivera on an interim basis. The stock, which has consistently underperformed, briefly rose 1% on Friday, snapping a four-day losing streak.
“You want to be directionless and rudderless, let’s put two people in the position,” said Kim Forrest, CIO at Bokeh Capital Partners, highlighting investor concerns about the lack of clear leadership.
Struggles in AI and Manufacturing
Intel has struggled to compete in the booming artificial intelligence (AI) market and faced delays and cost overruns in its pivot toward manufacturing chips for other companies. These issues culminated in a disastrous earnings report over the summer, leading to widespread analyst downgrades.
Currently, Intel’s stock has the lowest consensus rating since March 2023, with only seven of 52 analysts tracked by Bloomberg recommending it as a buy.
Leadership Questions
Gelsinger’s exit has raised doubts about Intel’s ability to find a suitable replacement. Analysts like Hendi Susanto of Gabelli Funds noted Gelsinger’s unique qualifications, including his deep manufacturing expertise and Intel’s CPU business.
“I thought Gelsinger was the best-possible CEO for Intel,” Susanto said. “I can’t really come up with a list of candidates who have strong manufacturing backgrounds. It is a herculean task.”
Potential candidates like Marvell Technology CEO Matt Murphy and former Cadence Design Systems CEO Lip-Bu Tan are seen as lacking the technical and manufacturing expertise needed to execute a turnaround.
Strategic Moves and Uncertainty
On Thursday, Intel took steps to strengthen its leadership by adding Steve Sanghi, CEO of Microchip Technology, and Eric Meurice, former ASML Holding NV chairman, to its board. Analysts welcomed the move, noting the need for semiconductor experience among Intel’s directors.
However, without clear leadership or a cohesive strategy, Intel’s stock remains under pressure. The company’s shares are trading at about 24 times forward earnings, similar to the semiconductor sector average, but with far less impressive growth prospects compared to industry leader Nvidia.
A Long Road Ahead
Intel’s turnaround will likely be a protracted and difficult process. Thomas Martin, senior portfolio manager at Globalt Investments, compared Intel’s challenges to General Electric’s lengthy restructuring.
“GE managed it, but it took decades, and chips are a more competitive business,” Martin said. “Intel obviously isn’t worth zero, but you have to have the talent and knowledge to know what to do with it, and that’s a tall order.”
What’s Next for Intel?
While Gelsinger’s exit opens the door for restructuring or deal-making, analysts remain cautious. Until Intel finds a permanent CEO with the expertise to address its complex challenges, investor confidence is unlikely to recover fully.
