Intel shares surged 10% in pre-market trading after Wall Street backed the decision to appoint Lip-Bu Tan as CEO. Tan, a former board member of the company, resigned in August due to disagreements over the chipmaker’s development strategy. The decision comes amid Intel’s prolonged underperformance in the market.
Tan faces the challenge of reviving the company’s position after it missed the semiconductor boom driven by artificial intelligence and spent billions of dollars developing its own manufacturing business. In recent years, Intel has lost market share in the data center and personal computer segments, while its manufacturing division has suffered billion-dollar losses. Overall, Intel’s stock has lost about 60% of its value in the past five years, while the Nasdaq Composite and S&P 500 have more than doubled in the same period.
Analysts at TD Cowen described Tan’s appointment as “the best stakeholders could have hoped for,” highlighting his “deep industry connections” that could help attract customers to Intel’s contract manufacturing business.
Tan will assume his role next week, three months after the resignation of former CEO Pat Gelsinger. He joined Intel’s board two years ago to assist with the company’s transformation but left due to disputes over personnel policies and corporate culture.
Skepticism about Intel’s future has grown in recent months following reports that competitors, including Broadcom, considered acquiring its chip development and marketing divisions, while TSMC explored options for managing some or all of Intel’s manufacturing operations.
Analysts expect Tan to continue Gelsinger’s strategy of keeping both chip development and manufacturing under one roof. In a letter to employees, Tan pledged to make Intel a leading foundry—a term referring to a contract chip manufacturer. However, experts warn that attracting customers to this business could be difficult, as chip designers may be reluctant to entrust production to a potential competitor.
Nonetheless, Tan has a strong reputation as a “neutral player” due to his experience at Cadence Design Systems, which supplies chips and design software. Analysts believe this could help Intel address some strategic challenges.
Bernstein analyst Stacy Rasgon noted that Tan’s prior board experience gives him an advantage: “It allowed him to gain deep insight into Intel’s internal problems, and he likely has a more realistic perspective than his predecessors. Gelsinger’s excessive optimism ultimately proved to be his biggest mistake.”
However, the transformation process is expected to take several years, a point Tan hinted at in his address to employees.
Last year, Intel’s market capitalization fell below $100 billion for the first time in three decades as its stock lost 60% of its value. Additionally, sales of Gaudi AI chips fell short of targets.
More analysts are advising investors to sell Intel stock rather than buy it, with most experts rating the company’s shares as “hold,” according to LSEG data.
“Tan faces a massive challenge, and there is much work to be done. However, something needs to change to give investors a clearer signal to act. If he fails, the situation may become irreparable,” Rasgon concluded.