Intel Stock Surges as Chipmaker Reportedly Plans to Cut 20% of Workforce

Intel shares jumped on reports of significant workforce reductions planned by the troubled semiconductor giant, as investors await the company's quarterly earnings report scheduled for Thursday.

Intel Shares Rise Nearly 7% Following Bloomberg Report

Intel (INTC) stock rose as much as 6.7% on Wednesday following a Bloomberg report published late Tuesday indicating that the chipmaker plans to cut 20% of its workforce. This significant market reaction comes just one day before Intel is scheduled to release its quarterly earnings report after market close on Thursday.

The potential workforce reduction represents a major strategic shift for Intel, which has been struggling to maintain its competitive position in the semiconductor industry. Once the dominant force in chip manufacturing, Intel — the only US chip manufacturer capable of producing leading-edge semiconductors at scale — has faced mounting challenges in recent years as the market increasingly focuses on AI capabilities and specialized processing power.

Intel Struggles with Market Position Amid AI Revolution

Intel's financial performance has reflected these challenges, with shares plummeting approximately 60% in 2024 and declining a more modest 2.7% year to date. The company has faced a double challenge: its manufacturing division continues to consume significant cash resources while its product business steadily loses market share to rival Advanced Micro Devices (AMD).

The reported layoffs would come after Intel's new CEO, Lip-Bu Tan, warned employees last month that "hard decisions" lay ahead for the company. This statement created anxiety among Intel staff, with two current employees from Intel's manufacturing business telling Yahoo Finance that personnel were bracing for potential layoffs.

Intel CEO Acknowledges Innovation Gap While Pursuing Dual Strategy

While Tan has not yet detailed his comprehensive strategy for Intel, he has publicly acknowledged that the company "fell behind on innovation." His stated approach involves simultaneously building out Intel's emerging "merchant foundry" business while attempting to catch up to Nvidia (NVDA) in the increasingly important AI chip design arena.

This dual strategy represents a significant shift for Intel. While the company has traditionally manufactured its own chip designs, a merchant foundry business model involves producing semiconductors designed by other companies. Intel Foundry Services was launched in 2021 under former CEO Pat Gelsinger, who was removed by the board in December after less than three years at the helm.

Intel Faces Workforce Management Challenges Amid Executive Turnover

Intel's workforce has experienced significant volatility in recent years. Under Gelsinger's leadership, which began in February 2021, the company increased its headcount by 10% through an aggressive hiring campaign. This expansion was followed by announcements of 12,000 job cuts in 2022 and plans for an additional 15,000 staff reductions in 2024.

Beyond the rank-and-file workforce challenges, Intel has also suffered from high turnover at the executive level. Many senior leaders have departed for competitors like TSMC (TSM) and Nvidia or have accepted early retirement packages, further complicating the company's efforts to execute a consistent strategic vision.

Intel Decline Attributed to Organizational Bloat and Decision-Making Issues

Former Intel executives have pointed to organizational factors as significant contributors to the company's decline. They argue that an oversized workforce has led to slow decision-making processes and complicated internal politics that hamper innovation and strategic agility. These structural issues, combined with what they describe as poor strategic decisions made over more than a decade, have eroded Intel's once-dominant market position.

The potential 20% workforce reduction could be seen as an attempt to address these organizational inefficiencies while simultaneously reducing costs during a challenging period. As investors await Thursday's earnings report, the market's positive reaction to the potential layoffs suggests that Wall Street believes streamlining Intel's operations may be a necessary step toward revitalizing the struggling chipmaker.

As Intel attempts to navigate its turnaround under new leadership, the semiconductor industry continues to evolve rapidly, with competitors like AMD, Nvidia, and TSMC (TSM) advancing their technological capabilities and market positions. The success of Intel's transformation will depend not only on cost-cutting measures but also on its ability to innovate and reestablish itself as a leader in an industry increasingly dominated by AI-focused chip designs and manufacturing capabilities.