Intel CEO Pat Gelsinger off duty, stock increases 5%

Intel It was announced Monday that CEO Pat Gelsinger has retired from the company effective Dec. 1, capping a turbulent nearly four-year tenure at what was once America's leading semiconductor company but saw its stock price and market share collapse during his tenure.

Intel CFO David Zinsner and Intel Chief Product Officer MJ Holthaus have been named interim co-CEOs. Longtime board member Frank Jeri will serve as Intel's interim CEO. Intel shares rose 5% on Monday in pre-market trading.

Yeri, Intel's longest-serving board member, will now have to head another CEO search. Gelsinger, 63, had an illustrious career at Intel, rising to become the company's first chief technical officer at the turn of the century, before taking on a senior position at EMC. Gelsinger returned to the company from VMware, where he served as CEO, to stabilize Intel in 2021, replacing then-CEO Bob Swan.

“It has been a challenging year for all of us as we made difficult but necessary decisions to position Intel in today's market dynamics,” Gelsinger said in a press release.

Gelsinger laid out a bold plan when he arrived in 2021 to turn the flagging company into a chip industry juggernaut. It has sought parity with the two leading chipmakers, Samsung and Taiwan Semiconductor Manufacturing Co. He pursued large buildouts in the United States and around the world, an expensive endeavor that greatly impacted Intel's free cash flow and increased the company's debt load.

He also attracted government investment, positioning Intel as the single largest beneficiary of the USA Chips and Science Act. Government money has begun flowing to Intel in recent weeks and will help the company's chipmakers in Arizona and Ohio. Gelsinger's retirement comes a week after Intel and the CHIPS Law and Science Office finalized a $7.86 billion grant.

Gelsinger also moved to position the company as vital to American national security. He won a multibillion-dollar contract with the Department of Defense to build secure chips, and in his meetings with analysts and potential customers he stressed that Intel was a trusted partner of the US government.

But all this was not enough to calm investors, who increasingly began to view Intel's aggressive spending as foolishness.

Investors are becoming increasingly cautious about Intel's prospects, especially as the artificial intelligence wave rises to rival the competition Nvidia Leaving Intel in the dust. The company's market capitalization is less than half of what it was in 2021, and briefly topped less than $100 billion earlier this year. The company's shares are down 52% year to date.

In August, Intel reported disappointing quarterly results, sparking its biggest sell-off in 50 years, and said it would lay off more than 15% of its workforce as part of a $10 billion cost-cutting plan. CNBC reported that Intel has hired consultants to defend itself against activist investors.

There is no indication yet that an activist has taken a significant position in the company's stock, nor is there any indication that overtures have been made to Intel's board of directors. It is not clear what agenda the activist will pursue at the company.

Intel in September revealed plans to spin off the company's foundry business into an independent subsidiary, a move that would open up outside financing options. In the same month, Qualcomm made overtures regarding a potential acquisition.

Gelsinger's replacement, when found, will lead a company that is leaner and more challenging than ever before. Many of the problems Gelsinger faced were inherited: not pursuing a mandate to make chips for Apple's mobile devices and passing on the Nvidia acquisition were just two of the conscious decisions made by Intel's previous leadership that left the company at a competitive disadvantage.

These decisions were made by Intel's Board of Directors and former CEOs. But Gelsinger's dismissal over the weekend raises new questions about the company's governance. Lip Bo Tan left Intel's board of directors earlier this year, leaving the company without any director with semiconductor experience. Numerous reports have emerged in the weeks since detailing the companies' dysfunctional takeover strategy and boardroom rancor.

— CNBC's Jordan Novet contributed reporting.

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