Intel stock surges 7% on news CEO Bob Swan to be replaced by VMware's Pat Gelsinger

• Shares of Intel are up over 7% on Wednesday on news CEO Bob Swan will be replaced by VMware's Pat Gelsinger.
• The news comes after activist hedge fund Third Point LLC, which holds a $1 billion stake in Intel, urged "immediate change" at the company.
• Third Point CEO Daniel Loeb wrote to Intel chairman Omar Ishrak arguing that the U.S. will lose its 'leading-edge semiconductor supply' if action isn't taken.

Shares of Intel are up over 7% Wednesday on news CEO Bob Swan will be replaced by VMware's Pat Gelsinger.

The surprise move comes after activist hedge fund Third Point LLC said "immediate change" is needed to reverse the semiconductor giant's fortunes.

Third Point CEO Daniel Loeb wrote to Intel chairman Omar Ishrak on December 29 urging immediate action to secure the company's role as a major provider of processor chips for PCs and data centers.

The New York-based hedge fund holds a $1 billion stake in Intel.

"Without immediate change at Intel, we fear that America's access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more," Loeb wrote.

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Swan joined Intel back in 2016 as the company's CFO before being named interim CEO in 2018 and then securing the full-time role in early 2019. Now Swan is out, and former Intel CEO and chief technology officer Pat Gelsinger is in.

"After careful consideration, the board concluded that now is the right time to make this leadership change to draw on Pat's technology and engineering expertise during this critical period of transformation at Intel," Omar Ishrak, independent chairman of the Intel board, said in the press release.

The news comes on a busy week for the semiconductor powerhouse, as the first virtual CES, the largest annual tech industry conference, kicked off Monday.

Intel stock was already rising on the back of news that the company's PC processors outperformed those of rival Advanced Micro Devices, but Wednesday's move pushes the two-day gain for Intel shares over 10%.

Still, Intel stock has underperformed recently, according to many analysts, sinking 16.8% in 2020 while competitors AMD and Nvidia saw their stocks double in value.

Plus, not all analysts were impressed by Intel's CES performance. Rosenblatt Securities' Hans Mosesmann called the CPU announcements "roughly as expected" and said they represented mostly incremental upgrades.

Intel currently boasts eight buy ratings, two overweight ratings, 18 hold ratings, three overweight ratings, and seven sell ratings, according to data from the Wall Street Journal.

Shares of the Santa Clara-based company are cheap based on classic valuation metrics, however, trading at just 11x earnings and 3x sales.