Rise in Intel's stock price observed post-release of information suggesting government intervention
The U.S. government is set to invest in Intel, one of the world's leading chipmakers, as part of a deal to support Intel's expansion of U.S. production. The government will acquire a nearly 10% stake in Intel, worth approximately $8.9 billion, primarily using funds from previously awarded but not yet disbursed grants under the Biden administration’s CHIPS and Science Act and the Secure Enclave program.
This investment, which is described as passive, will not grant the government any voting rights or governance power in Intel. The move aims to reinforce U.S. semiconductor manufacturing, enhancing national security and economic strength. The deal supports Intel's ongoing and planned U.S. factory expansions, including a major hub in Ohio.
The potential investment stems from a meeting between Intel CEO Lip-Bu Tan and former President Trump, with the intention of bolstering U.S. semiconductor manufacturing. The U.S. government's stake in Intel, if it goes through, will be significant but will not control the company, given Intel's market capitalization of over $100 billion.
President Trump has publicly endorsed this move, calling it a "great deal" for both America and Intel. However, the White House has dismissed reports of the potential deal as speculation, and plans regarding the investment are still in flux.
Intel, which has been struggling in the semiconductor market for years, faces increased pressure in its traditional businesses of PC processors and data centers. Meanwhile, Nvidia has taken a leading position in the business of chips for artificial intelligence.
Shares of Intel surged more than seven percent following news of the potential investment. It is worth noting that the U.S. government received a "golden share" in the takeover of American steelmaker US Steel by Japanese rival Nippon Steel under Trump. This golden share grants the American president's approval necessary for certain actions like job relocations, plant closures, or large takeovers in the U.S.
This development marks a significant step in the U.S. government's efforts to support domestic semiconductor manufacturing and underscores the strategic importance of this industry for the country's economic and national security interests.
The U.S. government's investment in Intel, worth approximately $8.9 billion, will primarily be funded from grants under the Biden administration’s CHIPS and Science Act and the Secure Enclave program. This passive investment, which will not grant the government any voting rights or governance power in Intel, is part of an initiative to reinforce U.S. semiconductor manufacturing, focusing on technology and general-news sectors.
