On August 1, Intel announced a 15% cut in its workforce, equivalent to 15,000 people, after reporting a net loss of $1.6 billion in the second quarter.

From its position as the leading chip brand, Intel is struggling to catch up with its competitors, mainly Nvidia - the company that is taking control of the GPU business amid the artificial intelligence (AI) fever.

According to a lawsuit filed in federal court in which CEO Patrick Gelsinger and CFO David Zinsner are co-defendants, the plaintiffs claim that Intel concealed internal chip manufacturing problems that led to poor second-quarter earnings results.

Unlike many of its competitors, Intel designs and manufactures its own chips through its own foundries, a decision that helped the company secure a temporary $8.5 billion federal grant under the CHIPS Act.

The company told investors that the internal business model would save Intel “$8 billion to $10 billion by the end of 2025.” But the move turned out to be much more costly than investors anticipated, the complaint said.

“However, investors were unaware that Intel’s foundry business was struggling, costing investors billions of dollars more than investors were aware of, even as foundry revenue growth declined over the period,” the lawsuit said, referring to the period from January 25 to August 1, 2024.

The lawsuit alleges that Intel, along with the company's CEO and CFO, made false and misleading statements that inflated the company's stock price.

Shareholders in the lawsuit cited statements from the defendants that they said were “counting chickens before they hatched their business” at Intel’s business units, including the foundry model.

For example, in Zinsner's January 2024 press release: "We continued to drive operational efficiencies in the fourth quarter and easily achieved our $3 billion in cost savings commitment for 2023. The company expects to continue to operate efficiently and effectively in 2024 and beyond, as we implement a new in-house foundry model designed to drive transparency and accountability as well as higher returns to shareholders' capital."

Not only was it misleading, the plaintiffs also claimed that Intel failed to disclose that "its foundry business was experiencing skyrocketing costs and required significantly more capital expenditures than investors had believed, and as a result, it was incurring a $7 billion loss by 2023."

James Park, a securities regulation expert at the University of California, Los Angeles, said the allegations in the lawsuit against Intel are “pretty accurate.” However, Intel will likely argue that the “cost savings statement” is a forward-looking statement, which is protected by the safe harbor clause in the Private Securities Litigation Reform Act.

(According to BI, Yahoo)

Intel might have been different if it hadn't rejected OpenAI . Intel's stock is down 58.5% since January. The chipmaker might not have been struggling against AI rivals if it hadn't rejected OpenAI a few years ago.