Intel NASDAQ:INTC, a Santa Clara, California-based chipmaker supplying processors for data centers, saw its shares jump 8.6% on Tuesday after confirming plans to eliminate additional jobs and restructure its key data center group. The gain extended a rally that has more than doubled Intel's stock this year, as investors have responded to signs that Chief Executive Officer Lip-Bu Tan may be making progress with the company's turnaround. Intel did not disclose the number of affected positions but said the changes are part of a broader effort to build a more focused and efficient organization.
Intel's data center group is currently supporting a rebound in overall revenue as the company works to meet rising demand for processors used in artificial intelligence data centers. Its Xeon product range is playing a growing role in running AI software as companies expand the services they provide. Investors may view this demand as an important source of support for Intel while management continues reducing costs and attempting to return the business to profitability.
However, Intel has yet to offer the type of accelerator chip that has dominated the development of AI software, leaving the company behind one of the industry's most valuable markets. NVIDIA NASDAQ:NVDA, Intel's rival and a supplier of accelerator chips used to create AI software, has captured billions of dollars in revenue that Intel missed by failing to address this segment. Intel has already eliminated tens of thousands of jobs in recent years, reducing its workforce to approximately 83,200 employees as of March 28 from more than 130,000 in 2022, suggesting that workforce reductions remain a central part of its cost-cutting strategy.