Chip Vulnerability Takes Toll On Intel Stock

Intel shares fell nearly 2 percent last Thursday (Jan. 4) after it was revealed that security flaws might allow hackers to steal sensitive information from devices.

According to Reuters, the disclosure has caused investors to worry not only about the potential financial liability, but also the toll it will take on the largest chipmaker’s reputation.

While Apple, Microsoft and other software makers have released patches to protect against the vulnerabilities, Intel may take a hit financially due to lawsuits brought on because of the slowdown the patches would cause, which could then force customers to replace their devices.

“The potential liability is big for Intel,” said Eric Johnson, dean of Vanderbilt University’s Owen Graduate School of Management. “Everybody will be scrambling over the next few days to figure out just how big it is.”

Although the patches would slow down its chips, Intel claims that most customers won’t notice. Amazon Web Services, Microsoft and Google released statements essentially agreeing with Intel.

However, the flaws will likely result in cloud companies pressuring Intel to lower prices on chips in the future, said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group, which owns shares in Intel. “What (Intel’s cloud customers) are going to say is, ‘You wronged us, we hate you, but if we can get a discount, we’ll still buy from you,’” she said.

Forrest also predicts that Intel will increase its chip development spending to focus on security.

So far, there have been no known cyberattacks caused by the vulnerabilities. Still, lawyers filed a lawsuit in a San Jose, California federal court last week, seeking class-action status and compensation for people who bought vulnerable Intel chips or computers that came with them already installed.

While more lawsuits are expected, it is expected that Intel’s biggest customers will quietly seek compensation for any harm caused by the flaws, including covering the cost to patch or replace machines.