Wall Street responded positively to the appointment of Lip-Bu Tan as Intel's new chief executive. But Intel stock is likely to face a rocky road ahead as Tan looks to turn around the struggling chipmaker.
Intel announced late Wednesday that its board had appointed Tan as CEO after a three-month search following the sudden retirement of previous CEO Pat Gelsinger. Tan previously served as chief executive of Cadence Design Systems. He will join the company effective March 18.
Tan also will rejoin Intel's board of directors after stepping down last August.
Interim co-CEOs David Zinsner and Michelle Johnston Holthaus will remain with the company. Zinsner will continue to serve as executive vice president and chief financial officer, and Johnston Holthaus will remain CEO of Intel Products.
On the stock market today, Intel stock jumped 14.6% to close at 23.70. However, in the past year through Wednesday's close, Intel stock had fallen 53%.
The appointment of Tan as CEO is a "good start" but Intel has significant challenges, Morgan Stanley analyst Joseph Moore said in a client note.
Those challenges include delays in its server chip product line, a very competitive PC chip market, lack of a compelling AI chip offering, and over $10 billion in losses in its foundry business over the past 12 months. There is "no quick fix" for those issues, he said.
Moore rates Intel stock as equal weight, or neutral, with a price target of 25.
Investment bank Stifel said the new CEO is "a longer-term positive," but Intel faces a lengthy period of transition as it adapts to the now AI-centric market. Stifel rates Intel stock as hold.
Intel's Foundry Operations In Focus
On Wednesday, Intel stock advanced 4.6% to close at 20.68 following a news report that a consortium of companies has suggested taking over its chip-manufacturing operations.
Taiwan Semiconductor Manufacturing has pitched fabless chipmakers Advanced Micro Devices, Broadcom and Nvidia the idea of taking stakes in a joint venture to operate Intel's chip-fabrication operations, Reuters reported.
Tan's appointment seems to calm speculation that Intel might split its product and manufacturing businesses, TD Cowen analyst Joshua Buchalter said in a report.
In a message to Intel employees, Tan acknowledged that it's been "a tough few years" for the company. But he said he is prepared to remake the company for future success.
"Together, we will work hard to restore Intel's position as a world-class products company, establish ourselves as a world-class foundry and delight our customers like never before," Tan said.
"In areas where we have momentum, we need to double down and extend our advantage," he said. "In areas where we are behind the competition, we need to take calculated risks to disrupt and leapfrog. And in areas where our progress has been slower than expected, we need to find new ways to pick up the pace."
Intel Stock Upgraded To Neutral
TD Cowen's Buchalter said Tan is a "very strong choice" to lead Intel. But changes at Intel will take some time to bear fruit, he said.
"A true turnaround is still very likely measured in years rather than quarters," Buchalter said in a report. He rates Intel stock as hold with a price target of 20.
Tan has good insight into Intel's problems after having served previously on the company's board, Wedbush Securities analyst Matt Bryson said in client note.
"He should be very familiar with Intel's current situation, allowing him to hit the ground running with a clear direction," Bryson said.
Also, Tan is "arguably one of the most connected men in tech given his past role with Cadence as well as his venture activities," Bryson said. He rates Intel stock as neutral with a price target of 20.
BofA Securities analyst Vivek Arya upgraded Intel stock to neutral from underperform on the CEO news. He also raised his price target to 25 from 19.
"We believe Intel has a greater opportunity to restructure/turn things around under his leadership, with Intel's strong incumbency/brand position in enterprise PC/server CPUs (central processing units) increasing the potential for success," Arya said in a client note.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
