Just a few weeks after portraying the company’s CEO as a conflicted leader unsuited for the position, President Donald Trump revealed on Friday that the U.S. government has acquired a 10% interest in troubled Silicon Valley pioneer Intel.
Trump posted, “INTEL is a Great American Company with an even more incredible future. The United States of America now fully owns and controls 10% of INTEL.”
The conversion of $11.1 billion in previously released cash and promises gives the U.S. government a stake.
In total, 433.3 million shares of non-voting stock are being given to the government at a price of $20.47 each, which is less than the closing price of $24.80 on Friday.
On paper, such spread indicates that the US government has already made $1.9 billion.
The unexpected development places the U.S. government among Intel’s biggest investors at a time when the Santa Clara, California-based company is laying off over 20,000 employees in an effort to recover from years of mistakes made under several CEOs.
Lip-Bu Tan, the current CEO of Intel, has only been in his position for a little over five months, and earlier this month, it appeared that he might already be in hot water after some lawmakers voiced national security concerns regarding his previous venture capitalist investments in Chinese companies.
In an August 7 post, Trump seized on such worries and called for Tan’s resignation.
The U.S. government is now betting that the company is on the mend after losing more than $22 billion since the end of 2023, but Trump backed off after the Malaysian-born Tan publicly pledged his loyalty to the United States in a letter to Intel employees and met with the president at the White House.
In his post on Friday, Trump praised Tan as a “much respected” CEO.
Tan praised Trump in a statement for “driving historic investments in a vital industry” and promised to repay his confidence in Intel.
Tan stated, “We look forward to working to advance U.S. technology and manufacturing leadership, and we are grateful for the confidence the President and the Administration have placed in Intel.”
The stock price of Intel is currently just marginally higher than it was when Tan was appointed in March, and it is more than 60% lower than its peak of roughly $75, which was set 25 years ago when its processors were still leading the personal computer boom until being surpassed a few years later by the move to cellphones.
The present market value of the company is approximately $108 billion, which is a small portion of the $4.3 trillion valuation of the current chip kingpin, Nvidia.
The main source of the investment is funding from the U.S. government to Intel under the CHIPS and Science Act, which was initiated during President Joe Biden’s administration to encourage greater local computer chip manufacturing and reduce reliance on foreign companies.
However, the Trump administration, which has frequently criticized the Biden administration’s policies, believed that the CHIPs were an unnecessary gift and is now attempting to benefit from the money that was promised to Intel.
Earlier this week, U.S. Commerce Secretary Howard Lutnick stated, “We believe America should benefit from the deal.”
“It’s clear that this is the appropriate course of action.”
Only $2.2 billion of the approximately $7.8 billion promised to Intel under the incentives scheme had been paid out thus far.
An additional $3.2 billion of the government funding is coming from the “Secure Enclave” initiative.
Critics see the acquisition as a concerning fusion of the public and private sectors that might harm the tech industry in several ways, even though the U.S. government will not have a seat on Intel’s board of directors and cannot vote with its shares.
Scott Lincicome, vice president of general economics for the Cato Institute, cited a possible scenario in which more tech companies might feel pressured to purchase potentially inferior chips from Intel to win over Trump at a time when he is already engaged in a trade war that could impact their products.
“All things considered, it’s a terrible action that will seriously hurt American businesses, tech leaders, and the American economy as a whole,” Lincicome wrote on Friday.
Additionally, if Trump begins obsessing about Intel’s stock price while using his propensity to boast about his prior economic triumphs, the 10% stake may increase the pressure already on Tan.
The CEO of money management Laffer Tengler Investments, Nancy Tengler, is one of the investors who left Intel years ago due to all of its problems.
Tengler expressed concerns about Trump interfering with Intel’s operations and stated,
“I don’t see the benefit to the American taxpayer, nor do I see the benefit, necessarily, to the chip industry.”
Tengler remarked, “Give it to the private sector and let people like me be the critics, and let the government get to the business of government, regardless of how good of a businessman you are.”
The U.S. government owning a sizable stake in a well-known corporation is uncommon but not unheard of.
During the Great Recession in 2008, one of the most prominent examples was when the government gave General Motors around $50 billion in exchange for almost 60% of the company when it was about to go bankrupt.
After selling its GM stock, the government ultimately suffered a loss of about $10 billion.
Trump’s drive to move production to the United States, which has been at the center of his global trade war, aligns with the U.S. government’s ownership of Intel.
The president thinks the United States will be in a better position to keep up its technological edge over China in the race to develop artificial intelligence if the nation’s reliance on chips made elsewhere is reduced.
Trump had been using his influence to change the way big computer chip firms operated even before he acquired the 10% interest in Intel.
In exchange for export licenses, the government is demanding Nvidia and Advanced Micro Devices, two firms whose chips are driving the AI boom, pay a 15% commission on their chips sold in China.
