Intel Avoids Investor Lawsuit Following Significant Stock Drop

A recent ruling made public on Tuesday indicates that a U.S. federal judge has dismissed a lawsuit brought by shareholders against Intel Corp. (NASDAQ: INTC). The lawsuit accused Intel of misleading investors regarding its foundry business, which played a role in a staggering $32 billion drop in the company's market value after it reported substantial financial losses.

Background: Investors claimed that Intel had concealed a $7 billion operating loss linked to its chip manufacturing division, Intel Foundry Services, during the fiscal year 2023. This significant loss was only disclosed in April 2024 after Intel revised its financial reporting methods, according to a report by Reuters.

U.S. District Judge Trina Thompson concluded that shareholders had mistakenly associated the loss with the foundry business. Furthermore, she determined that Intel had not engaged in misleading practices towards its investors.

In her ruling, Judge Thompson noted that statements made by former CEO Patrick Gelsinger in March 2024, in which he stated that Intel had "significant traction" and "growing demand for our foundry offering," were not misleading. These comments were deemed to have pertained to specific customers and did not suggest an overall boost in revenue.

Despite the dismissal, investors still have the option to file an amended complaint, leaving a possibility for further legal actions.

Significance: This lawsuit dismissal is particularly important in light of Intel's ongoing struggles to compete with major players like Nvidia Corporation (NASDAQ: NVDA) and Taiwan Semiconductor Manufacturing Co. (NYSE: TSM). These challenges have been intensified by the current boom in artificial intelligence technology.

Recently, reports suggested that Broadcom Inc. (NASDAQ: AVGO) and TSMC may be considering deals that could lead to the breakup of Intel.

In its fourth-quarter earnings announcement last month, Intel disclosed a revenue drop of $1.15 billion compared to the previous year, with the current market capitalization standing at approximately $90.10 billion.

Looking ahead, Intel is pinning its hopes for profitability on its advanced 18A process technology, which is expected to be featured in upcoming products like Panther Lake and Clearwater Forest. However, there have been delays as it appears that the company's chip fabrication plant in Ohio may not start operations until 2030 or 2031. The financial struggles have led to a second postponement of its $28 billion semiconductor project in central Ohio, now rescheduled for 2025.

Stock Performance: Following the ruling, Intel's stock closed at $20.81, reflecting a drop of 2.44%. In after-hours trading, the stock fell an additional 0.62%. Since the beginning of the year, however, the stock has shown a slight increase of 2.92%, as reported by Benzinga Pro.

Intel, lawsuit, investors