What just happened? Intel is learning that no matter how bad things are, they can always get worse. The beleaguered company has just had its credit rating downgraded by Fitch, placing Team Blue just two places above the dreaded junk credit status.
Fitch carried out an assessment on Intel that found the company was facing increasing challenges in maintaining demand for its products. It also noted the growing competition from the likes of NXP Semiconductors, Broadcom, Qualcomm, and AMD, many of which have stronger financial structures, though with weaker market positions.
Following the assessment, Fitch has downgraded Intel’s credit status to BBB from the previous BBB+. That puts it just two spots above junk status, and is Fitch’s lowest “investment grade” rating.
Credit: Finance Stu
For Intel to recover its previous credit rating, the company will require both stronger end markets and successful product ramps, along with net debt reduction over the next 12-14 months, Fitch wrote.
Intel falling behind in the AI race was also highlighted by Fitch. The credit agency said its AI strategy remains unclear and depends on a systems and software approach, an area where the company has traditionally been weak or absent.
Fitch did highlight some positives for Intel. It wrote that because of aggressive cost-cutting measures, including successive waves of headcount reduction, Intel now expects to lower its operating expenses to $17 billion in 2025 and $16 billion in 2026, copmared to $19.4 billion in 2024.
Intel is struggling like never before right now. In a public regulatory filing that appeared a few weeks ago, the company warned that it could slow down or even halt development of the advanced 1.4nm-class technology unless it secures a significant external customer and meets critical project milestones.
Intel expects to lay off approximately 24,000 workers throughout all of 2025 as part of CEO Lip-Bu Tan’s cost-cutting strategy, while plans for large new chipmaking “mega-fabs” in Germany and Poland have been put on hold. Intel also cut 15,000 jobs in 2023, and another 15,000 in 2024. Tan himself admitted last month that his firm is no longer a top 10 chipmaker.
Intel is also rapidly falling behind in the consumer CPU space. The recent Steam survey shows that AMD’s user share has reached a record 40% in the processor category following months of continuous growth at Intel’s expense.
Intel has been struggling for a long time now. In August 2024, Moody’s downgraded its credit rating to reflect expectations for significantly weaker profitability over the following 12 to 18 months.