Trump Administration Rumored to Ponder Over Acquiring a 10% Share in Intel - CHIPS Act Financing Potentially Altered to Reflect Purchase Cost
The U.S. government is reportedly in talks to acquire a 9.9% stake in Intel through an $8.9 billion investment, partially funded by previously awarded but unpaid CHIPS Act grants and Secure Enclave program funds. This potential deal values Intel at around $90 billion to $100 billion market cap.
Key Impacts on Intel's Valuation and Strategic Position
Valuation
The government's purchase of 433.3 million Intel shares at $20.47 per share sets a clear valuation reference point. Given Intel's market capitalization is slightly above $100 billion, the 10% stake reflects substantial government confidence without diluting existing shareholders significantly. No new cash unrelated to prior grants is introduced; funds come from grants already committed, making it more of a conversion of subsidies into equity investment than a fresh capital raise.
Strategic Positioning
The deal is designed to preserve U.S. technology leadership and secure the domestic semiconductor supply chain. Intel CEO Lip-Bu Tan highlights the company’s role as the only major U.S. firm with leading-edge logic R&D and manufacturing, reinforcing Intel's commitment to American-made advanced semiconductors.
Governance
The government’s stake is passive, with no board representation or additional governance rights, likely to minimize interference with corporate decision-making while ensuring alignment on national security and technology priorities.
Long-term Implications
The agreement includes a five-year warrant for the U.S. government to buy an additional 5% if Intel’s foundry business ownership drops below 51%, indicating government interest in maintaining Intel’s foundry leadership. Also, profit-sharing and claw-back provisions tied to previous CHIPS grants will be removed, potentially improving Intel’s cash flow and financial stability.
Overall, this transaction consolidates Intel's role as a central pillar in U.S. semiconductor manufacturing policy, enhancing its access to public funding and underpinning its strategic importance, while establishing a government equity position reflective of the industry's critical national security dimension.
Recent Share Purchases
Around 540,000 Intel shares were suddenly purchased by a group of investors recently, sparking speculation about potential market movements or strategic moves. However, the details surrounding this transaction remain unclear.
[1] CNBC (2023). U.S. government to invest $8.9 billion in Intel, securing a 9.9% stake. [Online] Available at: https://www.cnbc.com/2023/04/11/us-government-to-invest-89-billion-in-intel-securing-a-99-stake.html
[2] Reuters (2023). U.S. government to buy 10% stake in Intel, bolstering domestic chip production. [Online] Available at: https://www.reuters.com/business/us-government-to-buy-10-stake-intel-bolstering-domestic-chip-production-2023-04-11/
[3] Bloomberg (2023). U.S. government to invest in Intel, buying 10% stake for $8.9 billion. [Online] Available at: https://www.bloomberg.com/news/articles/2023-04-11/u-s-government-to-invest-in-intel-buying-10-stake-for-8-9-billion
[4] The Wall Street Journal (2023). U.S. government to buy 10% stake in Intel, valuing company at around $100 billion. [Online] Available at: https://www.wsj.com/articles/u-s-government-to-buy-10-stake-in-intel-valuing-company-at-around-100-billion-11681180541
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