Intel Escapes Shareholder Lawsuit Over Alleged Foundry Losses and Financial Misreporting
Intel has successfully dodged a potentially colossal lawsuit filed by the company’s shareholders, who had accused the chipmaker of concealing $7 billion in operating losses and manipulating its financial performance. According to a report by Reuters, U.S. District Judge Trina Thompson in San Francisco dismissed the lawsuit due to insufficient evidence. However, the plaintiffs can still file an amended complaint if they can bolster their allegations with stronger arguments.
Background and Allegations
The lawsuit was initiated shortly after Intel’s quarterly results revealed the extent of a financial downturn within the company’s foundry business. Shareholders alleged that Team Blue had delayed disclosing the $7 billion in operating losses in 2023, effectively reassuring investors that Intel Foundry Services (IFS) was performing well. The complaint named former Intel CEO Pat Gelsinger and CFO David Zinsner, accusing both of deliberately masking the foundry losses and presenting an overly optimistic view of the company’s finances.
According to court documents, plaintiffs claimed these omissions and misrepresentations caused Intel’s market value to plummet by 26%, translating to over $32 billion in lost valuation. The lawsuit asserted that investors were left with a false sense of security, a “delusion” that IFS was in better shape than it truly was.
Judge Thompson’s Ruling
In dismissing the lawsuit, Judge Thompson determined that Intel had not misled shareholders about the foundry losses. She noted that the reported operating losses were tied to Intel’s broader foundry model rather than being concentrated solely in the division responsible for producing chips for external partners. The court also found that former CEO Pat Gelsinger’s positive statements about IFS progress (including collaborations with specific partners) did not amount to a deliberate misrepresentation of the entire division’s performance.
Although this ruling provides Intel with significant relief, it may only be a temporary victory. The judge granted the plaintiffs the option to file an amended complaint if they can present more compelling evidence to support their allegations.
While the lawsuit’s dismissal spares Intel from immediate legal repercussions, its aftermath continues to reverberate. In the wake of the allegations, Intel’s share price tumbled drastically, contributing to an overall slump that has challenged the company’s market position. With the U.S. government actively encouraging domestic semiconductor manufacturing, there’s hope that Intel will capitalize on this policy environment under the Trump administration. Yet, the company faces stiff competition from industry rivals like TSMC, which is steadily bolstering its influence in U.S. markets.
What do you think about Intel’s recent legal victory and the shareholders’ allegations? Do you foresee the plaintiffs returning with a stronger complaint, or is Intel likely to move forward unscathed? Share your thoughts below!
