Intel should leave Foundry; Citi says long-term value at risk from Gelsinger exit By Investing.com

Investing.com – Intel Corporation (NASDAQ:) could see near-term gains from exiting its foundry business but now faces risks to long-term value with Pat Gelsinger stepping down as CEO, Citi analysts said in a note.

Citi analysts said it would be “in the best interests of Intel shareholders” for the company to abandon its attempts to be a commercial foundry and sell the business. The brokerage sees a higher likelihood of this scenario as Gelsinger has been a champion of the struggling foundry division.

But Citi also noted that Gelsinger was a driving force in improving Intel’s overall production and that the company could face “long-term problems” if the new CEO didn’t pass on his technical expertise.

Intel announced Monday that CEO Gelsinger is stepping down and being replaced by David Zinsner and Michelle Holthaus as interim co-CEOs. The chip maker’s shares, whose value had halved so far in 2024, fell slightly after the announcement.

The chipmaker has largely lagged behind rivals like TSMC (NYSE:) and NVIDIA Corporation (NASDAQ:) in adopting cutting-edge silicon, with its shortcomings becoming even more apparent in the last two years amid increased interest in artificial intelligence. The company largely failed to capitalize on an AI-driven surge in chip demand.

Gelsinger’s departure came less than four years into his term as the board lost confidence in his plan to turn around the struggling chip maker.

Gelsinger had recently outlined plans to spin off its foundry business, which has been consistently losing cash. But a recent $7.86 billion government subsidy the company received came with the restriction that Intel could only sell a limited stake in its foundry unit.

Citi analysts said Intel has little chance of success in the foundry business and that gross margins could improve significantly if the unit is divested.

The broker has a neutral rating on the stock with a price target of $22.0.