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Bond Market News
Intel Corp Downgraded to BBB by S&P
December 11, 2024
Intel Corp was downgraded by a notch to BBB from BBB+ by S&P. The downgrade reflects significant challenges faced by Intel’s core business segments in 2024. The rating agency said that Intel’s key segments like Client Computing, DCAI, and Network and Edge were struggling, mainly due to tight IT budgets and slow adoption of AI-related products. Intel is also grappling with competition from AMD in the x86 market and slow progress in AI and accelerated computing fields. The company’s AI revenue is expected to fall short of its $500mn target for 2024, while competitors like NVIDIA and AMD are performing much better. Intel is undergoing significant cost-cutting measures, aiming to reduce expenses by over $10bn in 2025, which should improve profitability in the long-term. However, challenges remain in its foundry business, where the ability to manufacture advanced chips in-house and attract external customers is crucial for profitability. Additionally, Intel’s ability to execute its turnaround plan remains uncertain, especially with its CEO Pat Gelsinger’s upcoming retirement.
Intel’s bonds traded stable with its 5.6% 2054s at 92.3 cents on the dollar, yielding 6.17%.
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