The news has been taken by investors as a signal the chipmaking giant is falling behind in the emerging era of artificial intelligence and comes as tech stocks are generally under pressure.
“I have no illusions that the path in front of us will be easy. You shouldn’t either,” said Intel chief executive officer Pat Gelsinger, in a memo to employees. He called the moves “some of the most consequential changes in our company’s history”.
While Intel has embarked on a massive and capital intensive investment programme, Gelsinger is struggling to improve the company’s products and technology fast enough to retain customers in a market segment where it was long the dominant brand.
Rivals like Nvidia, which has specialised in serving the AI segment, have overtaken Intel’s sales and other manufacturers like Advanced Micro Devices and Taiwan Semiconductor Manufacturing Co have stolen a march on their US rival.
Intel stock is not alone in coming under pressure. While Nvidia has been seen as a potential big winner from a shift to AI, its shares have fallen sharply in recent months, down 20pc since hitting a record $3.3tn valuation in June.
According to a report in yesterday’s Financial Times, influential US hedge fund Elliott Management has told its investors that Nvidia was in a “bubble” and that the potential impact of AI that had propelled its huge valuation had been “overhyped”.
Intel shares fell more than 22pc in pre-market trading yesterday, after closing at $29.05 in New York. Shares were already down over 40pc since the start of the year.
Intel’s advanced chip manufacturing facility in Leixlip, Co Kildare. Photo: Collins
Any job cuts at Intel have implications for Ireland, where the company has around 5,000 staff at its huge manufacturing facility in Leixlip, Co Kildare, although the company has not yet clarified the position in relation to Kildare-based staff.
The Irish jobs may avoid the worst of the losses, however. Intel has said it will focus the cuts mostly in areas like marketing and spending on research and development, which are relatively smaller aspects of its Irish operations.
There should be more clarity on the process next week, when the chip giant will begin offering “enhanced retirement” options, as well as voluntary redundancy packages.
Intel announced the news after worse-than-expected quarterly financial results, which saw sales revenue fall 1pc compared to the same three-month period last year. It made a loss of $1.6bn for the quarter, substantially higher than the same period last year.
In June, Intel completed a deal to sell 49pc of its Fab 34 plant at the Kildare facility for $11bn to a US private equity fund, Apollo Global Management.