Intel Shares Soar on Appointment of Chip Veteran Lip-Bu Tan as CEO, But Challenges Remain

Intel shares surged nearly 15% on Thursday, closing up 14%, as investors welcomed the appointment of Lip-Bu Tan as the company's new CEO. Tan, a former Intel board member and long-time chip industry executive, replaces interim co-CEOs who took over after the ouster of Pat Gelsinger in December. The appointment marks a pivotal moment for the struggling semiconductor giant, which has missed out on the artificial intelligence boom and faces mounting competitive pressures.

Tan brings a wealth of experience and a strong reputation to the role. He previously served as CEO of Cadence Design Systems, a major supplier of chip design software, where he oversaw more than a decade of significant growth, with the company more than doubling its revenue. Tan is also the founding managing partner of Walden Catalyst Ventures and chairman of Walden International, investment firms focused on emerging technologies. He is well-connected within the chip industry, with relationships spanning potential customers and rivals alike. This includes figures like Nvidia's Jensen Huang and AMD's Lisa Su.

The positive market reaction reflects optimism that Tan can leverage his experience and network to turn Intel around. "Tan in as CEO at Intel was as good as stakeholders could have hoped for," said TD Cowen analysts, highlighting his "deep relationships" across the chip ecosystem. Bank of America upgraded Intel to Neutral from Underperform, citing Tan's "solid track record" and potential to drive a turnaround, though they cautioned that risks remain due to Intel's lack of an AI roadmap and increasing competition.

However, Tan faces a daunting task. Intel has lost significant market share in data centers and PCs, its foundry business has posted billions in losses, and its stock has dramatically underperformed the broader market, losing about 60% of its value over the last 5 years. The company's market value remains stuck below $100 Billion, and its Gaudi AI chips have not meet sales targets. Notably, Tan previously served on Intel's board from 2022 to 2024 but left due to disagreements over the company's direction, specifically its workforce size and culture. This suggests he may have a clear vision for change, but also hints at potential internal challenges.

Tan has signaled his commitment to keeping Intel's chip design and manufacturing operations together, vowing in a letter to employees to make Intel a top foundry. This strategy, while potentially beneficial for leveraging Tan's industry connections, faces skepticism from some analysts who believe the foundry business may struggle to attract orders from chip designers who view Intel as a competitor. There have also been reports of potential joint ventures with TSMC and interest from major fabless companies like Nvidia, AMD, Broadcom, and Qualcomm, although no deals have been confirmed.

Analysts are cautiously optimistic, recognizing both Tan's potential and the long road ahead. Stacy Rasgon of Bernstein said to Reuters that Tan's prior board tenure "should have given him a pretty good idea of where all the bodies are buried." However, he also added that if Tan failed, Intel might be unfixable.

Dan Morgan, senior portfolio manager at Synovus Trust, said, "Intel may still need a strong partner regardless of who is CEO to turn the foundry business in the 'Black'." The consensus among analysts is largely "hold," with more recommending "sell" than "buy," according to LSEG data.

Tan's return to Intel as CEO is particularly noteworthy given his previous departure from the board over disagreements about the company's direction. This history might raise questions about how he will navigate internal challenges and implement his vision for change.