Intel’s stock soared 10% in premarket trading after the company announced the appointment of Lip-Bu Tan as its new CEO. Wall Street analysts believe the industry veteran’s leadership will restore investor confidence and strengthen Intel’s push into contract chip manufacturing.

A Strategic Leadership Shift

Tan, 65, is widely respected in the semiconductor industry, with deep connections across the chip ecosystem. Analysts at TD Cowen called his appointment “as good as stakeholders could have hoped for”, citing his ability to attract key customers to Intel’s contract manufacturing business.

Taking over next week, Tan replaces Pat Gelsinger, who was ousted three months ago following internal disagreements over Intel’s strategic direction. Notably, Tan had previously served on Intel’s board but left last year amid those disputes.

Intel’s Challenges and the Road Ahead

Intel has struggled to keep pace with the AI-driven semiconductor boom and has poured billions into expanding its chip-making business. However, skepticism about its future has intensified. Reports suggest competitors like Broadcom have considered acquiring Intel’s chip design and marketing units, while TSMC has reportedly explored control over some of its manufacturing plants.

The company has also suffered significant market share losses in data centers and PCs, alongside continued billion-dollar losses in manufacturing. Some analysts believe Intel may struggle to win over chip designers who see it as both a competitor and a potential manufacturing partner.

Why Tan’s Appointment Matters

Despite Intel’s struggles, analysts see Tan as a “neutral party” who can bridge the gap between Intel and the broader chip industry. His track record at Cadence Design Systems, where he oversaw years of strong growth, adds credibility to his ability to lead a turnaround.

Bernstein analyst Stacy Rasgon noted that Tan’s prior two-year tenure on Intel’s board has given him insight into the company’s challenges. Unlike previous leadership, Rasgon believes Tan will take a more realistic approach rather than the “unbridled optimism” that ultimately hurt Gelsinger’s leadership.

An Uphill Battle for Intel

While Tan’s appointment is seen as a positive step, analysts caution that Intel’s turnaround will take years. The company’s market value remains under $100 billion, the lowest in three decades, after a 60% stock decline last year. Intel’s Gaudi AI chips have also fallen short of sales targets.

Investor sentiment remains cautious, with more analysts recommending a “sell” than a “buy”, according to LSEG data. Rasgon summed up the situation, saying, “Tan has a big job ahead and a lot of work to do. But if he fails, Intel’s problems may have been unfixable to begin with.”