Intel’s chip business is showing signs of life after years of struggle

At a technology conference in San Francisco this week, admirers surrounded Lip-Bu Tan, the CEO of Intel, waiting to take a selfie with a man few had heard of before last year.

The spectacle made Matthew Sysak, an executive at technology company Lumentum, shake his head. Viewed from a few feet away, he likened the spotlight on Mr. Tan to the industry’s rock star approach to Jensen Huang, the chief executive of chipmaker Nvidia, now the world’s most valuable company.

“It’s a traveling circus,” he said incredulously.

It wasn’t long ago that Intel, once one of the most powerful technology companies in the world, was described as a fallen icon of Silicon Valley. Sales were falling sharply, costs were rising and debts were mounting. The US government stepped in last summer and took a 10 percent stake in the company.

Now Intel is showing signs of a turnaround. Its value has more than tripled to $650 billion, its business has begun to bounce back from the artificial intelligence boom, and it has added big customers like Nvidia and Apple.

The stakes are high for the company and Mr. Tan, who took over in March last year. Intel is a cornerstone of the US government’s efforts to rebuild the nation’s semiconductor manufacturing and wean Silicon Valley off its dependence on Taiwan.

If Intel can’t turn around now — when almost the entire chip industry is cashing in on AI — a fix may not be possible, said Chris Miller, author of “Chip War,” a book that chronicles the rise of the semiconductor industry.

“As America’s only high-end chip maker — and the only firm with its top-notch research in the U.S. — Intel’s fate shapes the future of the U.S. chip industry and determines how much the country relies on Taiwan,” Miller said.

Less than a year ago, President Trump demanded that Mr. Tan step down as Intel’s chief executive over concerns that the company he once led had illegally sold chip technology to China. A few days later, the two met and negotiated a deal for the government to take a 10 percent stake for $8.9 billion. The money was the remainder of a federal grant that Intel had promised through the Chip and Science Act, a bipartisan bill designed to reduce the United States’ dependence on Asia for semiconductors.

The investment was a hit, said Sanjay Natarajan, a senior executive at Intel’s manufacturing business until last year. It helped raise the company’s market value and signaled that the US government had a vested interest in restoring Intel’s business.

“The Trump administration was clearly picking winners and losers,” Mr. Natarajan said. “They’ve indicated they want Intel to do well.”

At the time, it was unclear whether the administration’s involvement would be a boon or a burden. But in the months that followed, Commerce Secretary Howard Lutnick began pushing technology leaders to work with Intel, including Mr. Huang of Nvidia, Elon Musk of SpaceX and Tim Cook of Apple, said a senior administration official who was not authorized to speak publicly.

The push came as AI reshaped the chip market. Tech giants poured hundreds of billions of dollars into data center chips. Personal AI assistants known as agents — relying on chips called central processing units, or CPUs, a signature product of Intel — have gained popularity. At the same time, the Taiwan Semiconductor Manufacturing Company, which makes more than 90 percent of the world’s advanced semiconductors, was swamped with more orders than it could fill.

Intel, which opened a factory near Phoenix that uses new technologies to make denser, more energy-efficient chips, immediately began to benefit from the new momentum. In September, Nvidia said it would invest $5 billion in Intel and use custom-made Intel processors in personal computers and data centers. Intel shares rose 23 percent after the report.

In May, Mr. Musk and Mr. Tan agreed that Intel would provide its technology to support the chip-making operation that Mr. Musk is developing, called Terafab. And in recent months, Apple, which is among the world’s biggest chip customers, agreed to start making a small portion of its laptop chips at Intel factories as early as 2027, four people familiar with the confidential deal said. Some smartphone chips may follow.

After Intel spent five years developing new technologies but failed to land a major customer, the deals were a win, Mr. Miller said.

Representatives for Mr. Musk and Apple did not respond to requests for comment.

Every agreement carries fundamental caveats. Under the deal with Nvidia, each company will sell the product, meaning the amount of money Intel makes on each chip could depend on who sells it, three people close to the company said, speaking on condition of anonymity to discuss the confidential agreement.

The deals with Mr Musk and Apple hinge on Intel’s progress with a new manufacturing process it is developing, called 14A. This fall, it promised to supply those companies with a set of tools to test the technology before final commitments, one of the people close to Intel said.

Faced with this uncertainty, Mr Tan pushed the company to cut costs. He reduced the workforce through layoffs and attrition to about 78,500 employees, from the 108,900 he had when he arrived. Ultimately, it wants to be a company with 75,000 people.

The rise of AI agents has boosted Intel’s data center sales. In April, it struck a deal to sell its own data center chips to Google and reported quarterly sales of its data center and AI products rose 22 percent from a year earlier to $5.1 billion.

But the company continues to lose money and market share. Its share of chips sold for servers has fallen from nearly 100 percent a decade ago to about 65 percent, according to Bernstein Research, which says Arm and Advanced Micro Devices have gained from cutting-edge technology.

In April, Intel said first-quarter revenue rose 7 percent from a year earlier to $13.6 billion, but posted a loss of $3.7 billion, including a $2.5 billion operating loss in manufacturing.

It will not be easy to catch up with your opponent. Intel has slashed its spending on developing future technology, cutting nearly 90 percent of its budget last year for Intel Labs, its research group that makes features for more powerful and efficient chips, said two former employees who spoke anonymously about the business changes.

Intel needs an AI boom to stay hot. The company’s losses are expected to fade next year as it ends years of aggressive spending to build chip factories in Arizona and New Mexico. Bernstein Research predicts that Intel will post $4.7 billion in revenue in 2027.

Mr Tan knows the turnaround has only just begun. He told friends he expected it to take at least five years, said John Shoven, who was chairman of Cadence Design Systems, the chip company that Mr. Tan previously led.

“He knew it wasn’t going to be quick,” Mr. Shoven said. “It’s a long road, but it’s off to a good start.”