Intel is set to cut 15,000 jobs in a bold move to catch up in the AI chip race.
The company’s shares dropped 20% after announcing lower-than-expected revenue for the current quarter.
Intel’s Bold Workforce Cuts
Intel is set to eliminate 15,000 jobs as part of its aggressive effort to catch up in the competitive artificial intelligence (AI) chip market. This reduction equates to 15% of its total employees and is expected to be largely completed by the end of 2024.
The cost-cutting strategy was announced alongside a forecast of lower-than-expected revenue for the current quarter. Intel’s shares plummeted by 20% after-hours in New York, dropping to $29.05.
CEO’s Vision for the Future
Pat Gelsinger, Intel’s chief executive, emphasised the need for fewer people at headquarters and more in the field, supporting customers. This aligns with his strategy to slash operating expenses and reduce capital expenditure by more than $10 billion by 2025.
Investor concerns over Intel’s position in the AI chip race have already caused a nearly 40% decline in the company’s share value this year. This drastic measure is seen as crucial for Intel to remain competitive.
Financial Forecasts and Reactions
Intel anticipates revenue between $12.5 billion and $13.5 billion for the upcoming quarter, significantly below analysts’ average estimate of $14.35 billion.
The company has been grappling with diminished demand for its traditional data centre chips and heightened competition in the personal computer market.
The suspension of dividend payments further underscores Intel’s focus on deleveraging and capital investments, which Gelsinger believes will offer greater shareholder returns in the long run.
Challenges in the AI Chip Market
Intel has faced significant competition in the AI chip market from companies like NVIDIA and AMD.
The demand for AI chips has surged, driven by advancements in machine learning and data analytics, putting pressure on Intel to innovate and catch up.
The company’s traditional products, such as data centre and personal computer chips, have seen a decline in demand, compounding its challenges.
Impact on Employees and Operations
The job cuts will have significant implications for Intel’s workforce, especially for those at its headquarters.
Employees in manufacturing and customer support roles might see a shift in responsibilities as the company restructures.
This move is part of a broader initiative to revitalise Intel’s manufacturing operations and improve its competitive edge in the AI chip sector.
Market Reactions and Share Performance
The announcement triggered a 20% drop in Intel’s share price, reflecting investor concerns.
This decline adds to the nearly 40% drop in share value that Intel has experienced this year, underlining the challenges the company faces.
Intel’s management hopes that these measures will eventually reassure investors and stabilise the company’s market position.
Looking Ahead
Intel plans to focus on innovations and strategic investments to regain its footing in the AI chip market.
Intel’s strategic job cuts and focus on innovation aim to revitalise its competitive edge in the AI chip market.
Despite immediate challenges, the company’s long-term goal is to enhance shareholder returns and regain market position.