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The US government has acquired a 10% equity stake in Intel (NYSE: INTC), a move that represents one of the biggest federal interventions in a private company since the 2008 financial crisis. This $8.9 billion purchase, which makes the government one of Intel’s largest shareholders, is being funded by converting previously promised grants from the CHIPS Act and the Secure Enclave program into shares.
“The United States of America now fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future,” said Trump in a Truth Social post.
Intel’s CEO Lip-Bu-Tan said, “President Trump’s focus on U.S. chip manufacturing is driving historic investments in a vital industry that is integral to the country’s economic and national security. We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership.”
US Government to Own a 10% Stake in Intel
The government’s equity stake in Intel will be funded by the $3.2 billion awarded to the company as part of the Secure Enclave program, as well as through the remaining $5.7 billion in grants that it was awarded, but not yet paid under the CHIPS and Science Act.
Under the new arrangement, the government acquires 433.3 million shares of Intel at a discounted price of $20.47 per share, a move Commerce Secretary Howard Lutnick hailed as a way to get “equity for the American people.”
Additionally, the government will receive a five-year warrant, at $20 per share for an additional 5% of stake, which would be exercised only if Intel’s stake in its foundry business falls below 51%.
Intel said, “The existing claw-back and profit-sharing provisions associated with the government’s previously dispersed $2.2 billion grant to Intel under the CHIPS Act will be eliminated to create permanency of capital as the company advances its U.S. investment plans.”
The US Government Also Invested in MP Materials
The investment is designed to be passive, meaning the government will not have a seat on Intel’s board or direct control over its decisions. The government has also agreed to vote with the company’s board on most shareholder matters. However, critics argue that this intervention, regardless of its structure, blurs the line between public policy and private business.
The administration has recently pursued a similar, albeit smaller, path with a “golden share” in U.S. Steel and a stake in MP Materials, which is the only rare-earths producer and processor in the country, signaling a broader intent to create “government-backed national champions” in industries deemed vital to national security.
SoftBank Also Invested $2 billion in Intel
Earlier this week, SoftBank also announced a $2 billion investment in Intel. The move also brings a new dynamic to the relationship between the two companies. SoftBank, with its majority stake in Arm Holdings, now has a financial interest in one of the primary architects of the x86 architecture, which has long been the dominant rival to ARM in the PC and server markets.
While the two companies have different business models, with ARM licensing its designs and Intel designing and manufacturing its own, SoftBank’s position could lead to interesting collaborative opportunities, particularly in Intel’s foundry business. SoftBank could potentially encourage ARM’s ecosystem of customers to utilize Intel’s manufacturing capabilities, thereby propping up a critical part of Intel’s long-term strategy.
INTC Is a Key Piece Of the US Manufacturing Ecosystem
Intel is far more than just a chipmaker; it’s a critical component of US manufacturing, economic strength, and national security. As the only leading-edge semiconductor company in the US that both designs and manufactures its own chips, Intel plays an irreplaceable role in the domestic technology ecosystem. This position has become even more vital as the US seeks to re-shore critical manufacturing and reduce its reliance on foreign supply chains.
The ability to manufacture advanced semiconductors domestically is a strategic imperative for the US. Chips are the essential building blocks for virtually all modern technology, from personal computers and smartphones to military hardware and artificial intelligence systems.
Intel is a crucial piece for US manufacturing, especially as demand for AI chips skyrockets amid the AI pivot.
Can INTC Turnaround with the New Investments?
Intel, which was once the world’s biggest chipmaker, is now a pale shadow of its glorious past.
A lot went wrong with Intel over the last two decades. It made the strategic blunder of turning down the offer to supply processors for the Apple iPhone. The company believed that Apple might not be able to sell enough of these, and it was a tiny market to bet on.
Intel was relatively slow with innovation, and AMD gradually gained market share in the PC market. Apple, too, stopped using Intel chips for its Mac and instead pivoted to its own chips.
Intel was pivoting to the foundry model and hoped to make chips for other chip designers. However, despite burning billions of dollars on that business, Intel hasn’t been able to secure enough clients for its foundries.
Despite being the biggest beneficiary of the CHIPS Act, Intel has not yet been able to turn the corner, even as the turnaround remains a work in progress. While Intel stock has seen some upward momentum in recent days, it trades at a fraction of its all-time highs, even as Nvidia has become a 4 trillion-dollar behemoth riding the AI euphoria.
Meanwhile, the financial backing from SoftBank and the US government would be a significant lifeline for Intel and provide the capital and political support needed to accelerate its turnaround plan.
The company has faced a challenging period, falling behind rivals like Taiwan Semiconductor Manufacturing Company in advanced chip fabrication and Nvidia in the booming AI sector.
