Silicon stumbles
Intel's risky reboot
Good morning, wafer warriors. This is your Stock Market Rundown for August 12th, 2024. Thanks for joining me. Let’s dig in:
TODAY’S TOP STORY: CHIP CRISIS
Who put the “silicon” in Silicon Valley? One storied pioneer of the Valley’s early days was Intel, founded in Mountain View, California in 1968.
Intel transformed the world of computers when it built the world’s first commercial microprocessor chip in 1974, and became a household name when Windows computers with “Intel inside” dominated consumer tech.
But the biggest giants fall the hardest. Over the past 20 years, Intel has been buffeted by competition, and fallen behind. Focused on PCs, it missed the mobile chip boom that exploded after the launch of the iPhone in the 2000s. Then more recently, it missed the AI transition—letting savvier peers like Nvidia and AMD pull ahead.
Result: the stock has dropped like a semiconductor fab’s productivity during a power outage. Intel’s market cap peaked at $500 billion in 2000; today, it’s a relatively puny $84 billion.
Despite management struggling to turn things around, Intel has been stuck in reboot mode. The company just announced it will lay off 15% of its 116,500 employees, and suspend dividend payouts.
To get back in the chip race, management is betting on a risky pivot. Intel plans to spend $100 billion to build and expand factories in four US states—with the help of some handouts from the US government.
It’s a bid to become America’s “chip champion” and help the US claw back share in global chip production. Considering Intel’s corporate strategy already has more patches than Windows 95, this better work, or shareholders will need their own cooling fans.
SO WHAT ELSE IS GOING ON?
US investors have gone from screaming “YOLO” to chasing yield. They’re pouring cash into money-market funds, seeking safe haven from volatile markets. What’s next, storing gold bars in the walls of your house?
Video game company Take-Two warned that next quarter’s sales will miss estimates due to declining in-game spending. Apparently when people spend more on groceries, they spend less on horses and ammunition in Red Dead Online.
Kroger just won a lawsuit claiming it slapped misleading labels on eggs from chickens that weren’t “free range”. Apparently some shoppers didn’t know that chickens are raised in the poultry equivalent of a supermax prison.
Is the Olympics just one big commercial for shoes? Nike and Puma both saw boosts to website visits during the opening week of the games. Let’s just ignore the fact that half the Summer Olympics events are done barefoot.
Farewell for today, team; can't wait to dive into more with you later this week. Yours in capitalism, The Axe
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