TLDR
- Intel stock dropped 1.5% in premarket trading despite Tuesday’s 7% gain after Commerce Secretary confirmed U.S. government talks to take equity stake
- Trump administration considering converting up to $10.9 billion in CHIPS Act grants into roughly 10% nonvoting stake in Intel
- SoftBank separately announced $2 billion investment in Intel, adding to the cash influx for the struggling chipmaker
- Other CHIPS Act recipients like TSMC, Samsung, and Micron could face similar government equity demands
- Intel reported sixth consecutive quarterly loss of $2.9 billion under new CEO Lip-Bu Tan’s turnaround efforts
Intel shares slipped 1.5% in premarket trading Wednesday as investors processed the reality of Uncle Sam potentially becoming their biggest shareholder. The decline came after Tuesday’s 7% surge following confirmation of government equity talks.
Commerce Secretary Howard Lutnick confirmed the Trump administration is discussing taking a stake in Intel in exchange for CHIPS Act funding. “It’s not governance; we’re just converting what was a grant under Biden into equity,” Lutnick told CNBC. “Nonvoting.”
The government is reportedly eyeing a 10% stake in the chipmaker. With Intel set to receive up to $10.9 billion in CHIPS Act grants, that would create a position worth more than $10 billion.
This move represents a shift from traditional grant structures to equity ownership. The Trump administration appears ready to become an active investor rather than just a funding source.
Intel didn’t respond to requests for comment Wednesday morning. The company continues operating under new CEO Lip-Bu Tan’s turnaround strategy.
Political Benefits vs. Dilution Concerns
Melius Research analyst Ben Reitzes sees both sides of the equation. “This incremental dilution gives us a bit of pause, but the benefits of being on the right side of Trump and his potential successor may be worth it,” he wrote.
Reitzes suggests Intel could become a bargaining chip in trade deals. Customers might also favor Intel’s foundry services to curry favor with the administration.
The analyst maintains a Hold rating with a $25 target price on Intel shares. Current trading levels sit close to that mark.
SoftBank Group separately announced a $2 billion stake in Intel Tuesday. The Japanese conglomerate’s investment adds cash to Intel’s turnaround efforts.
The combined government stake and SoftBank investment would provide Intel with substantial financial backing. Both moves signal confidence in the chipmaker’s strategic importance.
Broader CHIPS Act Implications
Other semiconductor companies receiving CHIPS Act funding could face similar equity demands. Taiwan Semiconductor Manufacturing, Samsung Electronics, and Micron Technology are major recipients of the $53 billion program.
TSMC and Samsung didn’t respond to comment requests Wednesday. Both companies have substantial government backing in their home countries already.
Taiwan’s National Development Fund holds a 6.4% stake in TSMC as the largest shareholder. South Korea’s National Pension Service maintains a position in Samsung.
The prospect of U.S. government ownership in foreign-controlled companies raises diplomatic questions. Such arrangements would require careful negotiation between governments.
Intel’s domestic status makes it a simpler target for federal ownership. The company remains America’s last premier chipmaker with full manufacturing capabilities.
Intel reported its sixth consecutive quarterly loss last month. Revenue stayed flat while losses expanded from $1.6 billion to $2.9 billion year-over-year.
CEO Tan continues pushing the company’s AI chip development strategy. Intel missed the initial AI transition but aims to capture future market growth.
The government stake discussion comes as Intel trades around $25 per share. Recent volatility reflects uncertainty about the company’s turnaround timeline and execution.
