President Donald Trump on Friday announced the US government now owns a 10% stake in Silicon Valley pioneer Intel, redirecting $11.1 billion of previously issued government funds and pledges to the struggling computer manufacturer, reports Associated Press.
The deal comes just a couple of weeks after Trump depicted the company's CEO as a conflicted leader unfit for the job, making the US government one of Intel's largest shareholders.
"The United States of America now fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future," Trump wrote in a post.
The government is getting 433.3 million shares of non-voting stock priced at $20.47 apiece — a discount from Friday's closing price at $24.80. That spread means the US government already has a gain of $1.9 billion, on paper.
This remarkable development coincides with the time when the company is in the process of cutting back spending and laying off more than 20,000 workers as part of its latest effort to make a comeback after years of missteps taken under a variety of CEOs.
Intel's current CEO, Lip-Bu Tan, who assumed office just more than five months ago, faced pressure after some lawmakers raised national security concerns about his past investments in Chinese companies while he was a venture capitalist.
Trump picked up on those concerns and, in a 7 August post, demanded that Tan resign.
But Trump held back after the Malaysian-born Tan showed his allegiance to the US in a public letter to Intel employees and went to the White House to meet with the president, leading to a deal that now has the US government wagering on the company's comeback trail after losing more than $22 billion since the end of 2023.
Trump hailed Tan as a "highly respected" CEO in his Friday post.
Meanwhile, Tan applauded Trump for "driving historic investments in a vital industry" and resolved to reward his faith in Intel, in a statement.
"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," Tan said.
Intel's current stock price is just slightly above where it was when Tan was hired in March and more than 60% below its peak of about $75 reached 25 years ago when its chips were still dominating the personal computer boom before being undermined by smartphones' takeover a few years later.
The company's market value currently stands at about $108 billion, far behind Nvidia, valued at $4.3 trillion.
The stake is acquired primarily through US government grants to Intel through the CHIPS and Science Act, which was started under President Joe Biden's administration in a bid to promote more domestic manufacturing of computer chips to lessen the dependence on overseas factories.
But the Trump administration, which has regularly criticised the policies of the Biden administration, saw the CHIPS Act as a needless giveaway and is now hoping to make a profit off the funding that had been pledged to Intel.
"We think America should get the benefit of the bargain," U.S. Commerce Secretary Howard Lutnick said earlier this week. "It's obvious that it's the right move to make."
Although the US government don't hold voting powers with its shares or hold a seat in Intel's board of directors, critics view it as a problematic hybridisation between the public and private sectors that could undercut the tech industry in a variety of ways.
For instance, more tech companies may feel pressured to buy potentially inferior Intel chips to curry favour with Trump.
"Overall, it's a horrendous move that will have real harms for U.S. companies, U.S. tech leadership, and the U.S. economy overall," Scott Lincicome, vice president of general economics for the Cato Institute, posted Friday.
The 10% stake could also intensify the scrutiny Tan faces, especially if Trump starts focusing on Intel's stock price, giving himself to his knack for celebrating his past successes in business.
Nancy Tengler, CEO of money manager Laffer Tengler Investments, is among the investors who left Intel years ago due to all the challenges stepping on Intel.
"I don't see the benefit to the American taxpayer, nor do I see the benefit, necessarily to the chip industry," Tengler said while also raising worries about Trump meddling in Intel's business.
"I don't care how good of businessman you are, give it to the private sector and let people like me be the critic and let the government get to the business of government.," Tengler said.
Although rare, it's not unheard of for the U.S. government to become a significant shareholder in a prominent company.
During the Great Recession in 2008, the government injected nearly $50 billion into General Motors in exchange for a roughly 60% stake in the automaker, at a time when it was on the verge of bankruptcy.
The government ended up with a roughly $10 billion loss after it sold its stock in GM.
The US government's stake in Intel goes hand in hand with Trump's push to bring production to the US, which has been a focal point of the trade war that he has been waging throughout the world.
By lessening the country's dependence on outsourced chips, the president believes the US will be in a better position to maintain its technological lead over China, both striving to create AI supremacy.
Comments