Intel’s stock plummeted 26%, closing at $21.48, its lowest point since 2013.The company’s disappointing forecast and cost-cutting measures have raised serious doubts about its future. According to a report in Reuters, Bernstein analyst Stacy Rasgon described Intel’s situation as “approaching the existential.”
To bolster its financial position, Intel aims to accumulate $40 billion in cash by the end of 2025 through cost reductions, government subsidies, and partnerships. However, analysts warn that the company’s turnaround could take years to materialize.
Once the world’s leading chipmaker, with the “Intel Inside” logo a valuable marketing feature on personal computers in the 1980s and 1990s. Part of the dotcom era’s Four Horsemen – along with Cisco Systems, Microsoft and Dell – Intel’s stock market value peaked at nearly $500 billion in 2000 before slumping that year and never recovering.
Weak employment numbers trigger slowdown worries in the US
The broader chip industry also experienced a downturn, with other chipmakers seeing declines for the second consecutive day. Weak employment data fueled fears of a U.S. economic slowdown, leading to expectations of a more aggressive interest rate cut by the Federal Reserve.
Moreover, concerns about the sustainability of AI investments, following less-than-stellar results from tech giants Amazon and Alphabet, contributed to the market’s decline.
AI pain for Intel
Intel, once a dominant force in the chip industry, has struggled to maintain its leadership position in recent years. The rise of mobile devices and the surge in AI chip demand have challenged the company’s core business.
The company’s ambitious plan to invest $100 billion in U.S. manufacturing, supported by government funding, is a crucial part of its turnaround strategy. However, the heavy spending and potential delays in reaping the benefits have raised investor concerns.
As Intel grapples with its challenges, bondholders are also showing signs of unease. The company’s bond yields have increased, indicating investor worries about its financial health and potential need for additional debt.