Trump administration weighs 10% stake in Intel via Chip Act grants

The U.S. government is exploring the possibility of acquiring a significant 10% stake in Intel, as reported by Bloomberg. This move could position the federal administration as the chipmaker's largest shareholder. Under consideration is the conversion of some or all of Intel's grants from the 2022 CHIPS and Science Act into equity, according to sources from the White House and other insiders. At the current market valuation, a 10% stake in Intel would equate to approximately $10.4 billion. Intel has received around $10.9 billion in grants from the Chips Act, which includes $7.9 billion earmarked for commercial manufacturing and $3 billion for national security initiatives. However, it remains uncertain whether this proposal has gained momentum within the administration or if discussions have taken place with relevant companies. The specifics regarding the size of the stake are still being negotiated, and it is unclear whether the White House will ultimately pursue this plan. Once a leader in the U.S. chip industry, Intel has faced challenges in keeping pace with international competitors in advanced chip manufacturing. Revitalizing this key player has become a national priority, particularly after reports of a potential government stake began circulating last week. Intel has been the principal beneficiary of the 2022 Chips Act, which was bipartisan and aimed at restoring U.S. dominance in semiconductor manufacturing, allocating $39 billion in grants to various global and American chipmakers. Although former President Trump supports the overarching goals of the Chips Act, he has previously criticized the legislation and called for its repeal earlier this year. Despite this, U.S. Commerce Secretary Howard Lutnick indicated that the administration was renegotiating certain aspects of the bill's grants. If the Chips Act funds are redirected to establish a government stake in Intel, it may reduce the total capital injected into the company through this arrangement. Nonetheless, this would illustrate the Trump administration's strategy of nurturing government-affiliated national champions in critical industries. Intel is currently struggling to capitalize on the surge in artificial intelligence and has not secured notable clients for its manufacturing services, despite significant investments. Analysts have suggested that government intervention may be crucial for the company’s recovery and U.S. national security, while others argue that Intel's issues extend beyond mere funding. In a related development, SoftBank has announced a $2 billion investment in Intel, equating to about 2% ownership and positioning SoftBank as the fifth-largest shareholder. Chairman and CEO Masayoshi Son stated that this strategic investment underscores confidence in the growth of advanced semiconductor manufacturing in the U.S., with Intel playing a pivotal role. Intel’s stock saw an initial boost following the news of potential government investment, climbing nearly 9% on August 14, although shares dipped over 3% after the Bloomberg report before rebounding by over 5% in after-hours trading following the SoftBank announcement. Intel CEO Lip-Bu Tan recently met with Trump after the president had previously called for his removal due to connections with China, but later praised Tan, describing him as having "an amazing story." It remains unclear if discussions regarding a government stake took place during this meeting.