Intel used to dominate the U.S. chip industry. Now it’s struggling to stay relevant
Intel CEO Pat Gelsinger speaks while showing silicon wafers during an event called AI Everywhere in New York, Thursday, Dec. 14, 2023.
Seth Wenig | AP
Intel’s long-awaited turnaround looks farther away than ever after the company reported dismal first-quarter earnings. Investors pushed the stock down 10% on Friday to their lowest level of the year.
Although Intel’s revenue is no longer shrinking and the company remains the biggest maker of processors that power PCs and laptops, sales in the first quarter trailed estimates. Intel also gave a soft forecast for the second quarter, suggesting weak demand.
It was a tough showing for CEO Pat Gelsinger, who’s early in his fourth year at the helm.
But Intel’s problems are decades in the making.
Before Gelsinger returned to the company in 2021, the company, once synonymous with “Silicon Valley,” had lost its edge in semiconductor manufacturing to overseas rivals like Taiwan Semiconductor Manufacturing Company. Now, in a high-risk quest, it’s spending billions per quarter to regain ground.
“Job number one was to accelerate our efforts to close the technology gap that was created by over a decade of under-investment,” Gelsinger told investors on Thursday. He said the company is still on track to catch up by 2026.
Investors remain skeptical. Intel is the worst-performing tech stock in the S&P 500 this year, down 37%. Meanwhile, the two best-performing stocks in the index are chipmaker Nvidia and Super Micro Computer, which has been boosted by surging demand for Nvidia-based AI servers.
Intel, long the most valuable U.S. chipmaker, is now one-sixteenth the size of Nvidia by market cap. It’s also smaller than Qualcomm, Broadcom, Texas Instruments, and AMD. For decades, it was the largest semiconductor company in the world by sales, but suffered seven straight quarters of revenue declines recently, and was passed by Nvidia last year.
Gelsinger is betting the company on a risky business model change. Not only will Intel make its own branded processors, but it will act as a factory for other chip companies that outsource their manufacturing — a group of companies that includes Nvidia, Apple, and Qualcomm. Its success acquiring customers will depend on Intel regaining “process leadership,” as the company calls it.
Other semiconductor companies would like an alternative to TSMC so they don’t have to rely on a single supplier. U.S. politicians including President Biden call Intel an American chip champion and say the company is strategically an important part of the U.S. processor supply chain.
“Intel is a big iconic semiconductor company which has been the leader for many years,” said Nicholas Brathwaite, managing partner at Celesta Capital, which invests in semiconductor companies. “And I think it’s a company that is worth trying to save, and they have to come back to competitiveness.”
But the company isn’t doing itself any favors.
“I think everyone has been hearing them say the next quarter will be better for two, three years now,” said Counterpoint analyst Akshara Bassi.
Intel has fumbled the ball for years. It missed the mobile chip boom with the unveiling of the iPhone in 2007. It’s been largely on the sidelines of the artificial intelligence craze while companies like Meta, Microsoft and Google order as many Nvidia chips as they can.
Here’s how Intel ended up where it is today.
Missed out on the iPhone
The late Apple CEO Steve Jobs unveiling the first iPhone in 2007.
David Paul Morris | Getty Images News | Getty Images
The iPhone could have had an Intel chip inside. When Apple developed the first iPhone, then-CEO Steve Jobs visited former Intel CEO Paul Otellini, according to Walter Isaacson’s 2011 biography “Steve Jobs.”
They discussed whether Intel should power the iPhone, which had not been released yet, Jobs and Otellini told Isaacson. When the iPhone was first revealed, it was marketed as a phone that ran the Apple Mac operating system. It would’ve made sense to use Intel chips, which ran on the best desktops at the time, including Apple’s Macs.
Jobs said that Apple passed on Intel’s chips because the company was “slow” and Apple didn’t want the same chips to be sold to its competitors. Otellini said that while the tie-up would have made sense, the two companies couldn’t agree on a price or who owned the intellectual property, according to Isaacson.
The deal never happened. Apple chose Samsung chips when the iPhone launched in 2007. Apple bought PA Semi in 2008 and introduced its first homegrown iPhone chip in 2010.
Within five years, Apple started shipping hundreds of millions of iPhones. Overall smartphone shipments — including Android phones designed to compete with Apple — surpassed PC shipments in 2010.
Nearly every modern smartphone uses an Arm-based chip instead of Intel’s x86 technology which was created for PCs in 1981 and is still in use.
Arm chips built by Apple and Qualcomm consume less power than Intel’s processors, making them more desirable for small devices like phones that run on batteries.
Arm-based chips quickly improved due to the enormous manufacturing volumes and the demands of an industry that needs new chips every year with faster performance and fresh features. Apple started placing huge orders with TSMC to build its iPhone chips, starting with the A8 in 2014. It gave TSMC the cash to upgrade its manufacturing equipment annually and surpass Intel.
By the end of the decade, some benchmarks had the fastest phone processors rivaling Intel’s PC chips for some tasks while consuming far less power. Around 2017, mobile chips from Apple and Qualcomm started adding AI parts to their chips called neural processing units, another advancement over Intel’s PC processors. The first Intel-based laptop with an NPU shipped late last year.
Intel has since lost share in its core PC chip business to chips that grew out of the mobile revolution.
Apple stopped using Intel in its PCs in 2020. Macs now use Arm-based chips based on the ones used in iPhones. Some of the first mainstream Windows laptops with Arm-based chips are coming out later this year. Low-cost laptops running Google ChromeOS are increasingly using Arm, too.
“Intel lost a big chunk of their market share because of Apple, which is about 10% of the market,” Gartner analyst Mikako Kitagawa said.
Intel made efforts to break into smartphones. It released an x86-based mobile chip called Atom that was used in the 2012 Asus Zenphone. But it never sold well and the product line was dead by 2015.
Intel’s mobile stumble set the stage for a lost decade.
All about transistors
US President Joe Biden holds a wafer of chips as he tours the Intel Ocotillo Campus in Chandler, Arizona, on March 20, 2024.
Brendan Smialowski | AFP | Getty Images
Processors get faster with more transistors. Each one allows them to do more calculations. The original Intel microprocessor from 1971, the 4004, had about 2,000 transistors. Now Intel’s chips have billions.
Semiconductor companies fit more transistors on chips by shrinking them. The size of the transistor represents the “process node.” Smaller numbers are better.
The original 4004 used a 10-micrometer process. Now, TSMC’s best chips use a 3-nanometer process. Intel is currently at 7-nanometers. Nanometers are 1,000 times smaller than micrometers.
Engineers, especially at Intel, took pride in regularly delivering smaller transistors. Brathwaite, who worked at Intel in the 1980s, said Intel’s process engineers were the company’s “crown jewels.” People in the technology industry relied on “Moore’s Law,” coined by Intel co-founder Gordon Moore, that said the amount of computing power would double and become cheaper at predictable intervals, roughly every two years.
Moore’s Law meant that Intel’s software partners, like Microsoft, could count on the next generation of PCs or servers being more powerful than the current generation.
The expectation of continuous improvement at Intel was so strong that it even had a nickname: “tick-tock development.” Every two years, Intel would release a chip on a new process (tick) and in the subsequent year, it would refine its design and technology (tock.)
In 2015, under CEO Brian Krzanich, it became clear that Intel’s 10nm process was delayed, and that the company would continue shipping its most important PC and server processors using its 14nm process for longer than the normal two years. The “tick-tock” process had added an extra tock by the time the 14nm chips shipped in 2017. Intel officials today say that the issue was underinvestment, specifically on EUV lithography machines made by ASML, which TSMC enthusiastically embraced.
The delays compounded at Intel. The company missed its deadlines for the next process, 7nm — eventually revealing the issue in a bullet point in the small print in a 2020 earnings release, causing the stock to plunge, and clearing the way for Gelsinger, a former Intel engineer, to take over.
While Intel was struggling to keep its legendary pace, AMD, Intel’s historic rival for server and PC chips, took advantage.
AMD is a “fabless” chip designer. It designs its chips in California, and has TSMC or GlobalFoundries manufacture them. TSMC didn’t have the same issues with 10nm or 7nm, and that meant that AMD’s chips were competitive or better than Intel’s in the latter half of the decade, especially for certain tasks.
AMD, which barely had market share in server CPUs a decade ago, started taking its slice. AMD made over 20% of server CPUs sold in 2022, and shipments grew 62% that year, according to an estimate from CounterPoint Research last year. AMD surpassed Intel’s market cap the same year.
Missing on the AI boom
Nvidia founder and CEO Jensen Huang displays products on stage during the annual Nvidia GTC Conference at the SAP Center in San Jose, California, on March 18, 2024.
Josh Edelson | Afp | Getty Images
Graphics processor units, or GPUs, were originally designed to play sophisticated computer games. But computer scientists knew they were also ideal for running the kind of parallel calculations that AI algorithms require.
The broader business community caught on after OpenAI released ChatGPT in 2022, helping Nvidia triple sales over the past year. Companies are spending money on pricey servers again.
AI-oriented GPU-based servers sometimes pair as many as eight Nvidia GPUs to one Intel CPU. In older servers, the Intel CPU was almost always the most expensive and important part. In a GPU-based server, it’s Nvidia’s chips.
Nvidia recently announced a version of its latest “Blackwell” GPU that cuts Intel out entirely. Two Nvidia B100 GPUs are paired with one Arm-based processor.
Almost all Nvidia GPUs used for AI are made by TSMC in Taiwan, using leading-edge techniques to produce the most advanced chip.
Intel doesn’t have a GPU competitor to Nvidia’s AI accelerators, but it has an AI chip called Gaudi 3. Intel started focusing on AI for servers in 2018 when it bought Habana Labs, whose technology became the basis for the Gaudi chips. The chip is manufactured on a 5nm process, which Intel doesn’t have, so the company relies on an external foundry.
Intel says it expects $500 million in Gaudi 3 sales this year, mostly in the second half. For comparison, AMD expects about $2 billion in annual AI chip revenue. Meanwhile, analysts polled by FactSet expect Nvidia’s data center business — its AI GPUs — to account for $57 billion in sales during the second half of the year.
Still, Intel sees an opportunity and has recently been talking up a different AI story — it could eventually be the American producer of AI chips, maybe even for Nvidia.
The U.S. government is subsidizing a massive Intel fab outside of Columbus, Ohio, as part of $8.5 billion in loans and grants toward U.S. chipmaking. Gelsinger said last month that the plant will offer leading-edge manufacturing when it comes online in 2028, and will make AI chips — perhaps those of Intel’s rivals, Gelsinger said on a call with reporters in March.
Intel’s death march
US President Joe Biden (C) stands behind a table, next to Intel’s CEO Pat Gelsinger (L) as they look at wafers while touring the Intel Ocotillo Campus in Chandler, Arizona, on March 20, 2024.
Brendan Smialowski | AFP | Getty Images
Intel has faced its old failures since Gelsinger took the helm in 2021, and is actively trying to catch up to TSMC through a process that Intel calls “four nodes in five years.”
It hasn’t been easy. Gelsinger referred to its goal to regain leadership as a “death march” in 2022.
Now, the march is starting to reach its destination, and Intel said on Thursday that it’s still on track to catch up by 2026. At that point, TSMC will be shipping 2nm chips. Intel said it will begin producing its “18A” process, equivalent to 2nm, by 2025.
It hasn’t been cheap. Intel reported a $2.5 billion operating loss in its foundry division on $4.4 billion in mostly internal sales. The sums represent the vast investments Intel is making in facilities and tools to make more advanced chips.
“Setup costs are high and that’s why there’s so much cash burn,” said Bassi, the CounterPoint analyst. “Running a foundry is a capital-intensive business. That’s why most of the competitors are fabless, they are more than happy to outsource it to TSMC.”
Intel last month reported a $7 billion operating loss in its foundry in 2023.
“We have a lot of these investments to catch up flowing through the P&L,” Gelsinger told CNBC’s Jon Fortt on Thursday. “But basically, what we expect in ’24 is the trough.”
Not many companies have officially signed up to use Intel’s fabs. Microsoft has said it will use them to manufacture its server chips. Intel says it’s already booked $15 billion in contracts with external companies for the service.
Intel will help its own business and enable better performance in its products if it regains the lead in making the smallest transistors. If that happens, Intel will be back, as Gelsinger is fond of saying.
On Thursday, Gelsinger said demand was high for this year’s forthcoming server chips using Intel 3, or its 3nm process, and that it could win customers who had defected to competitors.
“We’re rebuilding customer trust,” Gelsinger said on Thursday. “They’re looking at us now saying ‘Oh, Intel is back.'”
WATCH: Intel’s traditional business hasn’t grown fast enough
The Nasdaq MarketSite in New York, June 9, 2023.
Michael Nagle | Bloomberg | Getty Images
Silicon Valley executives and financiers publicly opened their wallets in support of President Donald Trump’s 2024 presidential run. The early returns in 2025 aren’t great, to say the least.
Following Trump’s sweeping tariff plan announced Wednesday, the Nasdaq suffered steep consecutive daily drops to finish 10% lower for the week, the index’s worst performance since the beginning of the Covid pandemic in 2020.
The tech industry’s leading CEO’s rushed to contribute to Trump’s inauguration in January and paraded to Washington, D.C., for the event. Since then, it’s been a slog.
The market can always turn around, but economists and investors aren’t optimistic, and concerns are building of a potential recession. The seven most valuable U.S. tech companies lost a combined $1.8 trillion in market cap in two days.
Apple slid 14% for the week, its biggest drop in more than five years. Tesla, led by top Trump adviser Elon Musk, plunged 9.2% and is now down more than 40% for the year. Musk contributed close to $300 million to help propel Trump back to the White House.
Nvidia, Meta and Amazon all suffered double-digit drops for the week. For Amazon, a ninth straight weekly decline marks its longest such losing streak since 2008.
With Wall Street selling out of risky assets on concern that widespread tariff hikes will punish the U.S. and global economy, the fallout has drifted down to the IPO market. Online lender Klarna and ticketing marketplace StubHub delayed their IPOs due to market turbulence, just weeks after filing with the Securities and Exchange Commission, and fintech company Chime is also reportedly delaying its listing.
CoreWeave, a provider of artificial intelligence infrastructure, last week became the first venture-backed company to raise more than $1 billion in a U.S. IPO since 2021. But the company slashed its offering, and trading has been very volatile in its opening days on the market. The stock plunged 12% on Friday, leaving it 17% above its offer price but below the bottom of its initial range.
“You couldn’t create a worse market and macro environment to go public,” said Phil Haslett, co-founder of EquityZen, a platform for investing in private companies. “Way too much turbulence. All flights are grounded until further notice.”
CoreWeave investor Mark Klein of SuRo Capital previously told CNBC that the company could be the first in an “IPO parade.” Now he’s backtracking.
“It appears that the IPO parade has been temporarily halted,” Klein told CNBC by email on Friday. “The current tariff situation has prompted these companies to pause and assess its impact.”
‘Cave rapidly’
During last year’s presidential campaign, prominent venture capitalists like Marc Andreessen backed Trump, expecting that his administration would usher in a boom and eliminate some of the hurdles to startup growth set up by the Biden administration. Andreessen and his partner, Ben Horowitz, said in July that their financial support of the Trump campaign was due to what they called a better “little tech agenda.”
A spokesperson for Andreessen Horowitz declined to comment.
Some techies who supported Trump in the campaign have taken to social media to defend their positions.
Venture capitalist Keith Rabois, a managing director at Khosla Ventures, posted on X on Thursday that “Trump Derangement Syndrome has morphed into Tariff Derangement Syndrome.” He said tariffs aren’t inflationary, are effective at reducing fentanyl imports, and he expects that “most other countries will cave and cave rapidly.”
That was before China’s Finance Ministry said on Friday that it will impose a 34% tariff on all goods imported from the U.S. starting on April 10.
At Sequoia Capital, which is the biggest investor in Klarna, outspoken Trump supporter Shaun Maguire, wrote on X, “The first long-term thinking President of my lifetime,” and said in a separate post that, “The price of stocks says almost nothing about the long term health of an economy.”
However, Allianz Chief Economic Advisor Mohamed El-Erian warned on Friday that Trump’s extensive raft of import tariffs are putting the U.S. economy at risk of recession.
“You’ve had a major repricing of growth prospects, with a recession in the U.S. going up to 50% probability, you’ve seen an increase in inflation expectations, up to 3.5%,” he told CNBC’s Silvia Amaro on the sidelines of the Ambrosetti Forum in Cernobbio, Italy.
Former Microsoft CEOs Bill Gates, left, and Steve Ballmer, center, pose for photos with CEO Satya Nadella during an event celebrating the 50th Anniversary of Microsoft on April 4, 2025 in Redmond, Washington.
Stephen Brashear | Getty Images
Meanwhile, executives at tech’s megacap companies were largely silent this week, and their public relations representatives declined to provide comments about their thinking.
Microsoft CEO Satya Nadella was in the awkward position on Friday of celebrating his company’s 50th anniversary at corporate headquarters in Redmond, Washington. Alongside Microsoft’s prior two CEOs, Bill Gates and Steve Ballmer, Nadella sat down with CNBC’s Andrew Ross Sorkin for a televised interview that was planned well before Trump’s tariff announcement.
When asked about the tariffs at the top of the interview, Nadella effectively dodged the question and avoided expressing his views about whether the new policies will hamper Microsoft’s business.
Ballmer, who was succeeded by Nadella in 2014, acknowledged to Sorkin that “disruption is very hard on people” and that, “as a Microsoft shareholder, this kind of thing is not good.” Ballmer and Gates are two of the 12 wealthiest people in the world thanks to their Microsoft fortunes.
C-suites may not be able to stay quiet for long, especially if the recent turmoil spills into next week.
Lise Buyer, who previously helped guide Google through its IPO and now works as an adviser to companies going public, said there’s no appetite for risk in the market under these conditions. But there is risk that staffers get jittery, and they’ll surely look to their leaders for some reassurance.
“Until markets settle out and we have the opportunity to access valuation levels, public company CEOs should work to calm potentially distressed employees,” Buyer said in an email. “And private company managements should refine plans to get by on dollars already in the treasury.”
— CNBC’s Hayden Field, Jordan Novet, Leslie Picker, Annie Palmer and Samantha Subin contributed to this report.
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