Intel announced drastic measures to revitalize its financial performance amid increasing competition from Nvidia (NASDAQ:NVDA) and AMD. The company revealed it will cut more than 15,000 jobs and halt non-essential projects, particularly in marketing and R&D. These steps aim to restore profitability after significant losses and falling behind industry rivals. The decision follows a $1.6 billion loss in the April-June period, in stark contrast to a $1.5 billion profit during the same period last year.
Intel’s previous layoffs in October 2022 involved plans to reduce costs by $8 billion to $10 billion annually through 2025, but the company later rehired some of the laid-off employees. This new round of layoffs targets a more extensive headcount reduction, set to be completed by the end of 2024. The current job cuts are separate from the 4% reduction in workforce between March and June of this year.
Impact on Share Prices
Following the announcement, Intel’s share price plummeted by 20%. The far-reaching effects of this news also hit other tech giants. Amazon (NASDAQ:AMZN) shares fell more than 4% despite a 10% rise in sales to $148 billion. The e-commerce giant’s slowdown from the previous quarter and forecasted future weakening has exerted pressure on margins, even as the company increases investments in artificial intelligence.
Struggles Against Rivals
Intel has faced significant challenges as businesses increasingly turn to competitors like Nvidia, known for its powerful AI chips. Intel reported a 1% year-on-year decline in sales for the three months ending in June and warned that the latter half of the year would be worse than expected. This prediction highlights the intensifying competitive landscape and Intel’s urgent need for transformation.
Chief Executive Pat Gelsinger emphasized to employees the necessity of taking “bolder actions” and “fundamentally changing the way we operate.” The company aims to regain its competitive edge and mitigate further financial decline through these comprehensive job cuts and reallocation of resources.
Intel’s decision reflects its struggle to adapt to a rapidly evolving tech industry, where competitors outpace in key areas like artificial intelligence. The company’s strategic pivot aims to shore up its financial health and enable a more agile response to market demands. The situation underscores the critical importance of innovation and strategic foresight in maintaining industry leadership.
