Intel used to dominate the U.S. chip industry. Now it's struggling to stay relevant

Intel's long-awaited turnaround looks farther away than ever after the company reported dismal first-quarter earnings. Investors pushed the shares down 9% on Friday to their lowest level of the year.

Although Intel's revenue is no longer shrinking and the company remains the biggest maker of processors that power PCs and laptops, sales in the first quarter trailed estimates. Intel also gave a soft forecast for the second quarter, suggesting weak demand.

It was a tough showing for CEO Pat Gelsinger, who's early in his fourth year at the helm.

But Intel's problems are decades in the making.

Before Gelsinger returned to the company in 2021, the company, once synonymous with "Silicon Valley," had lost its edge in semiconductor manufacturing to overseas rivals like Taiwan Semiconductor Manufacturing Co. Now, in a high-risk quest, it's spending billions per quarter to regain ground.

"Job number one was to accelerate our efforts to close the technology gap that was created by over a decade of underinvestment," Gelsinger told investors on Thursday. He said the company is still on track to catch up by 2026.

Investors remain skeptical. Intel is the worst-performing tech stock in the S&P 500 this year, down 37%. Meanwhile, the two best-performing stocks in the index are chipmaker Nvidia and Super Micro Computer, which has been boosted by surging demand for Nvidia-based artificial intelligence servers.

Intel, long the most valuable U.S. chipmaker, is now one-sixteenth the size of Nvidia by market cap. It's also smaller than Qualcomm, Broadcom, Texas Instruments, and AMD. For decades, it was the largest semiconductor company in the world by sales, but suffered seven straight quarters of revenue declines recently, and was passed by Nvidia