A federal judge on Wednesday dismissed a lawsuit against Intel, which accused the company and its management of hiding financial troubles of its semiconductor manufacturing division in 2023, reports Reuters. The U.S. District Judge Trina Thompson in San Francisco ruled that plaintiffs failed to present evidence that Intel and its executives committed any wrongdoing. The case was dismissed without prejudice, meaning the plaintiffs can file an amended complaint with stronger evidence.
Plaintiffs had argued that Intel and its then-CEO Pat Gelsinger and then-CFO David Zinsner concealed a $7 billion loss of its Intel Foundry unit in 2023, which led to stock inflation as well as a consequent massive $32 billion drop of the company's market capitalization in April 2024, when the company disclosed losses of its newly formed Intel Foundry division for 2023 and Q1 2025.
Starting in Q1 2024, Intel implemented its 'internal foundry' model, making its product divisions and external clients purchase manufacturing and packaging services from Intel Foundry, a separate division within the company. Before this, Intel only reported results for Intel Foundry Services (IFS), which catered exclusively to external customers.
On April 2, 2024, Intel fully disclosed its segment reporting changes and had to recast past financials, revealing that Intel Foundry lost $7 billion in 2023. This revelation triggered a sharp decline in Intel's stock. The court determined this loss was not solely tied to Intel Foundry Services, the division responsible for making chips for outside companies, contradicting investors' claims, but was attributed to Intel Foundry, a division that worked with both Intel and external customers
The lawsuit also challenged statements by Gelsinger and Zinsner, particularly Gelsinger's claim of 'significant traction' and 'growing demand' for the foundry business. The court ruled these statements were not misleading because they referred to specific customer engagements rather than overall financial health of Intel and Intel Foundry.
Plaintiffs also pointed to Intel's 26% stock drop after announcing layoffs and a dividend suspension in mid-2024, claiming it was evidence of misleading practices. However, the court ruled that a stock decline alone is not proof of fraud, as Intel has always had competitive challenges and publicly discussed its cost-saving strategy and restructuring plans.
Although the lawsuit was dismissed, the judge will allow investors to revise their complaint and refile. Intel declined to comment on the ruling, while legal representatives for the shareholders did not immediately respond to inquiries.
