Intel’s $32 Billion Disaster: Why Investors Are Furious
Intel just caught a major break. The tech giant was facing a lawsuit from angry shareholders who claimed the company misled them about its struggling foundry business, which they say led to a staggering $32 billion drop in market value. But in a big legal win, a federal judge tossed out the case, ruling that Intel didn’t actually deceive investors.
How Intel Lost $32 Billion in One Day
The lawsuit stemmed from a brutal day for Intel investors. On August 1, 2024, the company reported a $1.61 billion net loss for the second quarter, with revenue slipping 1% to $12.83 billion.The dismal results caused Intel’s stock to plummet, falling 26% in a single day.
Intel’s stock fell to $21.48 by August 2, wiping off approximately $32 billion in market value in a single day. The corporation announced extreme cost-cutting steps to staunch the bleeding, including the suspension of dividend payments and the layoff of over 15,000 people, or more than 15% of its staff.
Intel hoped these moves would save $10 billion by 2025, but for investors, the damage had already been done.
Why Shareholders Sued Intel
Furious investors took Intel to court, claiming the company had not been upfront about how badly its foundry business was struggling. They charged Intel with making false claims regarding its business practices in order to artificially raise the price of its shares between January and August 2024.
The complaint said that although sales were declining, Intel’s chip fabrication company, known as foundry services, was covertly accruing billions of dollars in additional expenses. When the truth was eventually revealed, investors said, the stock crashed, causing them to lose a lot of money.
Why the Judge Dismissed the Case
A federal judge wasn’t convinced by the shareholders’ claims. U.S. District Judge Trina Thompson dismissed the lawsuit, ruling that investors had wrongly linked a $7 billion operating loss in 2023 to the foundry business. In reality, Intel hadn’t even reported that loss under its updated accounting structure until April 2024.
The judge also rejected claims that Intel’s former CEO Patrick Gelsinger misled investors when he said in March 2024 that the company was seeing “significant traction” in its foundry business. She pointed out that his statement referred to specific customers, not Intel’s overall revenue, meaning it wasn’t deceptive.
Intel’s Bigger Problems Aren’t Over
While Intel might have dodged this lawsuit, it still faces major challenges. The company has struggled to keep up with fierce competitors like AMD, Nvidia, Samsung, and TSMC, especially in the booming AI chip market.
Intel’s financial troubles have raised serious questions about whether it can reclaim its dominance in the semiconductor industry. The company is betting on cost-cutting and restructuring to turn things around, but it won’t be easy.
What’s Next for Intel?
Intel’s leadership insists they have a plan to get the company back on track. They’re cutting costs, shifting strategies, and hoping to regain investor confidence. But with the AI revolution reshaping the tech industry and competitors surging ahead, Intel has a tough road ahead.
