TLDRs;
- Intel stock fell 2.85% Friday despite Nvidia’s $5B investment and U.S. stake surge.
- U.S. government stake in Intel now worth $14B, rising $4.9B since August purchase.
- Nvidia-Intel partnership targets chip co-development for PCs and data centers.
- Intel trades at dot-com era valuations, raising questions about sustainability of rally.
Intel Corporation ($INTC) saw its shares dip just over 2% on Friday, reversing part of the massive rally earlier this week.
The pullback comes despite major announcements, including Nvidia’s $5 billion investment and the U.S. government’s 10% equity stake in Intel, now valued at roughly $14 billion.
The stock had soared nearly 28% on September 18, marking Intel’s largest one-day surge in almost four decades. However, profit-taking and broader market caution weighed on shares by week’s end, pulling the stock lower to $29.69 as of midday trading Friday.
US Government Stake Swells to $14B
The U.S. Department of Commerce’s stake in Intel was first unveiled in August when the government agreed to purchase 433.3 million shares at $20.47 each. The deal was tied to funding under the Chips Act, which aims to reinforce domestic semiconductor production.
Intel has so far issued 274.6 million shares to the government, with another 158.7 million shares in escrow pending further disbursements. Following Wednesday’s rally, the stake’s value climbed to about $14 billion, representing a $4.9 billion paper gain in less than a month.
The White House has emphasized that the investment is designed to secure America’s semiconductor manufacturing capabilities and reduce reliance on overseas supply chains. Intel executives echoed this sentiment, saying the partnership provides stability for its foundry operations.
Nvidia Partnership Drives Rally
The latest surge in Intel stock was largely driven by Nvidia’s decision to invest $5 billion in the company and co-develop chips for both personal computers and data centers.
For Intel, which has faced mounting pressure from competitors like AMD and TSMC, the collaboration signals an important vote of confidence from the world’s most valuable chipmaker.
“This is a historic partnership that accelerates our path in advanced chip design while supporting U.S. technology leadership,” Intel said in a statement.
Nvidia, which has dominated AI accelerators, sees the tie-up as a way to expand its reach into broader computing platforms.
Despite the optimism, analysts caution that Intel is still navigating a challenging turnaround. Its market valuation has ballooned to levels not seen since the dot-com era, currently trading at about 57 times projected 12-month earnings, a lofty figure for a company still in restructuring mode.
Strategic Investments and Industry Trends
Intel’s ties to Washington are not new. Last month, the company disclosed that it received $5.7 billion in cash from the government in exchange for its 10% stake. The funding specifically targeted its foundry division, reinforcing U.S. semiconductor independence.
At the time, Intel CFO David Zinsner noted that the government secured a warrant allowing it to expand its ownership if Intel’s control over its foundry fell below 51%. However, he stressed that Intel intends to retain full control.
The broader semiconductor industry has also been shifting toward prioritizing supply chain security, even at higher costs. AMD, for instance, has committed to sourcing chips from TSMC’s Arizona plant despite paying up to 20% more than in Taiwan. Intel’s arrangement with the U.S. government mirrors this strategy by using public funds to offset the expense of domestic production.
