Intel shares have been on a rollercoaster ride lately. The ups and downs of one of the world's largest technology corporations are worthy of the most dizzying American rollercoaster. One moment, the bulls are jubilant because the stock jumped 28% in August, increasing the market value by approximately $24 billion, and the next, they are in despair over a 7% loss on news that the administration of US President Donald Trump may acquire about 10% of the company. And all this drama is unfolding against the backdrop of unprecedented criticism of CEO Lip-Bu Tan by the head of state.
Where is Intel headed, and how will its public confrontation with the White House end? What is hitting the IT giant's shares harder—political pressure or market fears? While investors try to hold on tight, Finam.ru takes a look at the trajectory of events unfolding at the company.
Trump rushes to the rescue
Intel has long been one of the largest American manufacturers. Founded in 1968, the company was a pioneer in the industry, producing increasingly faster and more powerful chips over the years and turning Silicon Valley into a stronghold of the US technology sector. But it found itself in a difficult position after missing several waves of innovation, including the revolution in smartphones and artificial intelligence. Instead, other chip manufacturers such as Nvidia, TSMC, and AMD rose to a new level.
In the end, Trump himself came to Intel's aid. At first, however, he demanded the resignation of the company's CEO due to a “severe conflict of interest” — referring to Lip-Bu Tan's ties to China at a time when the US is competing with that country in the race for dominance in the artificial intelligence industry. But Tan dismissed the accusations as misinformation and expressed his desire to have a “thorough conversation” with the president. The conversation ended with Trump saying, "Mr. Tan came in wanting to keep his job. I said it would be nice if the United States were your partner. He agreed, and they agreed to do it. And I think it's a great deal for them."
The deal did indeed turn out to be profitable. In any case, investors welcomed it with a more than 6% rise in the company's stock on Friday, August 22. According to official data, the Silicon Valley chipmaker agreed to sell the US government a 10% stake in its business worth $8.9 billion. Under the terms of the agreement, the government will not have a seat on the board of directors or other management rights at Intel.
This deal has become one of the largest government interventions in an American company since the bailout of the automotive industry after the 2008 financial crisis, The New York Times noted. Nearly 20 years ago, the US government invested tens of billions in Chrysler and General Motors to prevent their collapse.
In addition to the humanitarian goal of reviving the company, the White House's motive for the Intel deal was also to contribute to the chip bill. Prior to this, Trump and other officials had ridiculed him for “giving away” money without promising anything in return.
“Trump decided to turn the money that Biden was going to just give away into justice for the American people. He is correcting what Biden did completely wrong,” US Commerce Secretary Howard Lattnik said on CNBC, calling the Intel deal historic and capable of strengthening US leadership in semiconductor manufacturing.
Earlier, in accordance with the chip law that came into force in 2022, Intel had already been approved for a $2.2 million government grant to revive semiconductor production in the United States. The additional $8.9 billion it is now entitled to will also be allocated through grants under the chip law ($5.7 billion) and as part of a program called Secure Enclave ($3.2 billion), Politico magazine reports.
Intel's market capitalization currently stands at around $108 billion. Thus, the amount of government investment represents 9.9% of its price.
Hang in there
It would seem that everyone is saved — Intel, Tan, investors, and even the American people. However, analysts are sounding the alarm, according to Reuters. In their opinion, the money allocated to the California-based chip manufacturer will not be enough for its business to thrive.
Even the $2 billion promised by Japan's SoftBank Group in exchange for nearly 2% of Intel's shares may not be enough to revive the company. It is worth noting that Intel posted a loss of $18.8 billion at the end of 2024, marking the chipmaker's first loss since 1986.
In addition, legal formalities are also cause for concern. The deal with the government could be challenged by Intel shareholders or others concerned about its legality. Lawyers believe that the chip law may not allow the US government to convert its grants into equity capital.
The deal could also raise questions about whether Trump could ultimately play a role in exerting similar pressure on other companies in the industry and continue to take steps to establish government control over private business. It is also possible that he will repeal the chip law altogether, as he has repeatedly expressed his desire to get rid of it. It is worth remembering that his administration has previously pressured chip manufacturers to increase their investments in the US in order to receive about $36 billion in grants promised under Biden.
But returning to Intel, it should be borne in mind that government ownership may not solve its problems. The company is struggling to compete in the production of the latest chips. Even if the Trump administration insists that companies such as Apple and Qualcomm buy from Intel, it is still unclear whether Intel will be able to produce products that are in demand by technology companies. Tan himself warned last month that the company may have to stop producing chips if it does not have major customers. “In the future, our investment in the Intel 14A chip will be based on confirmed customer commitments,” he said.
The government may have to create incentives, such as tax breaks, to get companies to voluntarily cooperate with Intel. But all this means that Trump will continue to break established norms regarding government and business, moving away from the free market principles that have long prevailed in both major US political parties. It is not yet clear how this will end. Nor is it clear whether Intel will be able to break the deadlock and prove that it is capable of producing advanced chips to attract customers.
