The U.S. government’s decision to acquire a 10% stake in Intel, totaling $8.9 billion, has sparked a mix of reactions. The investment comes from previously awarded but unpaid grants under the Biden administration’s CHIPS Act and the Secure Enclave program, according to TechCrunch. While the Washington Post’s editorial board calls the move a ‘mistake,’ citing Intel’s struggles with execution and missed strategic opportunities, other observers suggest it could provide crucial support for Intel’s long-term ambitions. The deal has also drawn sharp criticism from former President Donald Trump, who has consistently opposed the CHIPS Act, calling it a ‘horrible, horrible thing’ and urging House Speaker Mike Johnson to remove it.
Legal experts, however, are raising questions about the legality of the government converting grants to equity, with some suggesting that the CHIPS Act may not allow such a conversion, potentially opening the deal to legal challenges. Despite these concerns, analysts highlight that the investment could help Intel’s expansion efforts, including its $100 billion plan to boost U.S. manufacturing facilities. Intel has announced plans to begin high-volume chip production at its Arizona plant later this year, and the support from the government, which will not take a seat on Intel’s board, could play a vital role in achieving these goals. However, the stake comes at a discount of 17.5% compared to Intel’s stock price on Friday, raising questions about the fairness of the deal.
Analysts remain cautiously optimistic about the potential benefits of the government’s involvement, although they acknowledge the limitations of the current funding. According to Reuters, the $8.9 billion is unlikely to be enough for Intel’s foundry arm to flourish without securing external customers for its cutting-edge 14A manufacturing process. Some experts, like Ryuta Makino of Gabelli Funds, believe that Intel’s current 18A process faces significant yield issues, which could deter potential customers from using Intel’s foundry services. The analyst argues that without resolving these technical hurdles, the government’s support may not significantly change Intel’s financial prospects. Despite these challenges, some investors see the support as a valuable addition to Intel’s capital base, which could aid in its ongoing expansion and recovery efforts.