Robbie Whelan Reporter at The Wall Street Journal based in Los Angeles
Lip-Bu Tan took over Intel last March with a mandate to cut down on what insider described privately as “drunk and disorderly” capex spending. Simply put, the company, once a Silicon Valley titan but lately fallen badly on hard times, was spending too much on its money-losing chip manufacturing business.
So Tan started slashing capex. He canceled plans for two fabs in Europe, further delayed another fab in Ohio, and made it clear internally that the “Field of Dreams” mentality of his predecessor — “If you build it, they will come…” — was over. No new plants or manufacturing lines would be built until they had solid customers locked in.
Investors responded warmly to this strategy. And they were even happier when the Trump administration in August took a 10% stake in Intel, arguing that the company was strategically important to U.S. interests and it was in danger of failing.
But one part of the cost-cutting plan nobody really noticed: Intel was also taking expensive manufacturing tools offline and writing down their value to save cash. These were the tools that were cutting-edge a year or two ago, the 3-nm and 7-nm and 10-nm process nodes that were used to make Intel’s once-popular Emerald Falls and Granite Falls data center CPUs (I know, every Intel product line sounds like one of those mysterious rooms in the Lumen headquarters from “Severance”).
Then, over the last few months, something strange happened. Demand for these somewhat-old CPUs surged. Companies like OpenAI, AWS and Google had realized that with the pivot to inference computing, agentic AI suddenly was requiring a lot more CPU capacity, rather than relying on more heavily on GPUs, the way the AI model/training phase had.
Intel got huge orders for its data center CPUs. The building boom picked up. They ran through their existing inventory, but because they had mothballed so many of he tools used to make these older chips, they couldn’t increase production. So they missed the wave.
That’s the story behind what they told investors in their earnings Thursday. And that’s why Intel has lost $46 billion in market cap on the last 36 hours.
And Intel’s Book of Job couple of years continues….
With great reporting from Sean McLain
