US chip-maker Intel has announced plans to cut over 15,000 jobs as part of an effort to revive its business and keep pace with competitors. Following this announcement and the report of declining sales, Intel’s shares plummeted by up to 20%.
This news negatively impacted shares of other tech giants and contributed to a significant drop in Asian stock markets. Japan’s Nikkei index fell 5.8%, the largest percentage drop since March 2020, closing down 2,216.63 points at 35,909.70. Japanese tech companies were among the hardest hit, amid concerns over the strength of the US economy.
A pessimistic survey of US manufacturing firms has raised fears of a weakening economy, increasing interest in the latest US jobs report due later on Friday. The three major US share indexes closed lower on Thursday, with significant names like Amazon seeing further declines in after-hours trading. Amazon’s shares fell more than 4% after reporting a 10% increase in sales to $148 billion, marking a slowdown from the previous quarter and forecasting further weakening, putting pressure on margins despite increased investments in AI.
Intel has faced challenges as businesses turn to rivals like Nvidia, known for its powerful AI chips. The company reported a 1% year-on-year drop in sales for the three months ending in June and warned of worse-than-expected performance in the second half of the year. CEO Pat Gelsinger acknowledged that revenues have not met expectations and highlighted the need for “bolder actions” and fundamental operational changes. Intel has cut investment plans and suspended dividend payments.
Lucy Coutts, investment director at JM Finn, noted that Intel is significantly reducing spending on its data centers and struggling to capture market share from other providers, causing a market shock.
In contrast, Apple reported a rebound in sales during the spring, overcoming weaknesses in China and a decline in iPhone sales. Revenues for the three months ending in June were $85.8 billion, up 5% year-on-year, marking a return to growth after a slump at the start of 2024. Apple is well-positioned to benefit from AI advancements, with AI-powered software improvements encouraging customers to upgrade their devices. The company recently introduced “Apple Intelligence” features, enhancing user experiences with functionalities like recording and transcribing phone conversations and generating personalized emojis.
Apple CEO Tim Cook expressed optimism about AI’s potential and emphasized continued significant investments in the technology. Despite a 1% drop in iPhone sales, increased sales of Macs and iPads, along with a record revenue from its services division, contributed to Apple’s overall positive performance.
