intel suffers Nvidia effect, prints net loss of $16 billion
The company is trailing its competitors in providing chips suitable for generative artificial intelligence
Over 15% of Intel’s workforce will be let go by the end of the year as part of a major cost-cutting initiative to save $10 billion.
The company is trailing its competitors like Nvidia in providing chips suitable for generative artificial intelligence (AI). 18,000 workers are anticipated to lose their jobs at the US semiconductor giant, which employed close to 125,000 people at the end of 2023.
The group’s second-quarter turnover at $12.8 billion, a 1 percent decrease year over year and less than analysts’ expectations. Most importantly, it reported a net loss of $16 billion as opposed to a profit of $15 billion the previous year.
At the end of the year, it also declared that it would not be paying a dividend. When trading on the New York Stock Exchange ended, its shares experienced an electronic trading decline of over 19%.
In the earnings release, Intel CEO Pat Gelsinger stated, “Despite reaching important technological milestones, our financial performance was disappointing in the second quarter.”
Chief Financial Officer David Zinsner stated that the company encountered “headwinds” in the second quarter that hindered production of components for the upcoming generation of AI-enabled computers
He declared, “We are taking proactive steps to improve our profits by orchestrating cost reduction.”. For the entire year, Intel intends to reduce its capital spending by over 20 percent, at a range between $25 billion to $27 billion.
The wave of generative AI that OpenAI and its ChatGPT platform launched in late 2022 is being tapped into by Intel’s rivals, including the US semiconductor companies Nvidia and AMD and Taiwan’s TSMC, which produces cutting-edge chips. The need for these incredibly complex components, which are essential to the functioning of this technology, has skyrocketed due to demand from industry heavyweights like Microsoft and Google, among others.
The United States is investing billions of dollars to amplify domestic semiconductor production to lessen its reliance on Asia. Intel is among the gainers as well. The business declared it would build additional production facilities in multiple US states. However, it lagged behind the most costly and sought-after chips available at the moment, which are appropriate for the servers used to train generative AI models.
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