Intel’s stock plummeted 6% on Tuesday following the unexpected departure of CEO Pat Gelsinger, bringing the company’s year-to-date losses to a staggering 55%. The leadership shake-up comes as Intel continues to struggle in the intensifying AI chip race, losing significant ground to competitors like Nvidia, which has emerged as the dominant player in AI semiconductors.
Gelsinger’s exit has sparked intense debate among Wall Street analysts about Intel’s future direction, particularly regarding its controversial foundry business strategy. The CEO had championed Intel’s push to become a major manufacturing foundry, but this strategy has resulted in compressed margins and failed to deliver the competitive advantages initially promised.
Citi analysts see potential upside in Gelsinger’s departure, suggesting it could pave the way for splitting Intel’s manufacturing and chip-design operations. They believe abandoning the merchant foundry strategy could boost gross margins and earnings per share, potentially driving the stock price to $50-$60 per share—representing a remarkable 165% gain from current levels of $22.47.
However, significant obstacles remain. Bank of America analyst Vivek Arya points out that Intel’s $7.9 billion CHIPS Act award requires the company to maintain a 35%-50% stake in its foundry business, making a clean separation legally complex. The incoming Trump administration could potentially revamp this legislation, but uncertainty remains.
Not all analysts are optimistic about a potential split. Wedbush Securities warns that separating the business units would only provide a temporary stock boost without addressing Intel’s fundamental competitive challenges. The company has lost market share in both its core PC and data center offerings while falling behind in AI chip development.
Intel chair Frank Yeary has committed to restoring investor confidence, but the path forward remains unclear. Citi analysts note that Gelsinger’s deep semiconductor expertise will be difficult to replace, warning that “the risk increases that Intel could remain behind TSMC/AMD if the new CEO is not as well-versed in advanced semiconductor manufacturing.” The company faces mounting pressure to regain competitiveness in the critical AI chip market while addressing structural challenges across its business portfolio.
Key Quotes
We believe it is in the best interest of Intel shareholders if the company stops trying to be a merchant foundry and we believe the chance is higher now given Gelsinger was a champion of it
Citi analysts made this assessment following Gelsinger’s departure, suggesting his exit could enable a strategic pivot away from the foundry business that has weighed on Intel’s margins and competitiveness in the AI chip market.
Both businesses are undergoing their own strategic, structural, financial, and competitive issues, with no near term solution in sight. The mgmt change could provide a near-term boost to the stock, but we maintain Underperform and $21 PO
Bank of America analyst Vivek Arya offered this sobering assessment, emphasizing that even if Intel splits its operations, both units face severe challenges in competing against rivals in the AI and semiconductor space.
It would not solve Intel’s larger issues (e.g. a lagging position vs. competitors for both chip design and production), meaning any immediate bump would seem to be onetime in nature
Wedbush Securities analysts cautioned that structural changes alone won’t address Intel’s fundamental competitive disadvantages in AI chip development and manufacturing compared to leaders like Nvidia and TSMC.
Now that Pat is gone, the risk increases that Intel could remain behind TSMC/AMD if the new CEO is not as well-versed in advanced semiconductor manufacturing as Pat
Citi analysts highlighted the challenge of replacing Gelsinger’s deep technical expertise, noting that finding leadership capable of navigating the complex AI chip landscape will be critical to Intel’s recovery prospects.
Our Take
Intel’s predicament illustrates a harsh reality of the AI revolution: legacy advantages mean little when technological paradigms shift. The company’s dominance in traditional computing didn’t translate to AI chip leadership, where Nvidia’s GPU architecture proved far more suitable for machine learning workloads. Gelsinger’s departure may offer a reset opportunity, but the fundamental challenge remains—Intel needs breakthrough innovations, not just organizational restructuring. The foundry strategy, while ambitious, diverted resources from AI chip development at precisely the wrong moment. Any new CEO must balance the political constraints of CHIPS Act funding with market realities demanding competitive AI processors. The next 12-18 months will determine whether Intel can mount a credible comeback or becomes a cautionary tale about missing transformative technology waves. The AI chip market won’t wait for Intel to figure things out.
Why This Matters
Intel’s leadership crisis represents a critical inflection point for the global AI chip industry. As artificial intelligence applications proliferate across industries, semiconductor manufacturers face unprecedented demand for specialized AI processors. Intel’s struggles highlight how quickly market dynamics can shift—the company that once dominated computing is now fighting for relevance in the AI era.
This story matters because Intel’s fate affects the entire AI ecosystem. The company’s inability to compete effectively with Nvidia in AI chips has created a near-monopoly situation, raising concerns about supply chain resilience and pricing power. If Intel cannot mount a credible challenge, businesses deploying AI solutions may face limited options and higher costs.
The geopolitical implications are equally significant. The CHIPS Act was designed to strengthen domestic semiconductor manufacturing, but Intel’s troubles raise questions about whether government subsidies can effectively counter market forces. The incoming administration’s potential policy changes add another layer of uncertainty to an already volatile situation, with implications for America’s technological competitiveness in the AI race.
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