Intel has warned of risks due to the US government's acquisition of 10% of its shares

The U.S. government's large stake in Intel's capital could pose risks to the chipmaker's business - from a possible drop in sales to limiting access to future government grants. The company warned about this in a document filed with the SEC. Specifically, Intel worries that U.S. involvement as the company's largest shareholder threatens its overseas business, which generates 76% of its revenue.

Chipmaker Intel disclosed "risk factors" to its business in connection with the spin-off of a 9.9 percent stake to the U.S. government in a Form 8-k report filed with the U.S. Securities and Exchange Commission (SEC) on Aug. 22.

In particular, the document notes that the participation of the U.S. government in the capital may affect Intel's foreign business: it may entail additional regulation or restrictions, for example, under the laws on "foreign subsidies" in other countries. Foreign markets accounted for 76% of Intel's revenue for the fiscal year ended Dec. 28, 2024, Reuters noted. And China, for example, accounted for 29%.

Intel also indicated that transferring the shares to the U.S. government at a below-market price would dilute the interests of current shareholders. The U.S. government will purchase Intel common stock at a $4 discount from the closing market price on Friday, August 22. The addition of such a large shareholder reduces the voting influence of other shareholders and also increases the government's control over regulations affecting Intel, which could limit the company's ability to deal in the best interests of shareholders, the company warned.

At trading on Monday, August 25, shares of the chipmaker at one moment rose by 4.3% to $25.88. However, then they lost all the gained and began to fall by more than 1.2%. Shares rose by 7% on Friday, August 22, when the deal with the U.S. government was officially announced. The week before, the U.S. president had called for Intel CEO Lip-Bu Tan to resign.

The Intel stake will be purchased with $5.7 billion in grants not yet awarded to the company under Joe Biden's CHIPS Act (government support for chipmakers developing manufacturing in the U.S.), as well as $3.2 billion allocated for the Secure Enclave program (a subprogram of CHIPS, but with other funding sources), which was also initiated by the previous White House administration.

Intel's obligations under the CHIPS program will be considered fulfilled. The company will continue to fulfill its obligations under the Secure Enclave program - to supply semiconductors to the U.S. Department of Defense, the chipmaker said in a press release.

The government's $8.9 billion investment is in addition to the $2.2 billion in CHIPS grants Intel has already received, bringing the total to $11.1 billion. Joe Biden's government did not consider converting the grants and subsidies into stock.

Intel noted that it remains to be seen whether the deal will lead to other government agencies also trying to turn earlier subsidies into equity stakes, or vice versa - refusing further funding, Reuters emphasizes.

The allocation of a stake in Intel "was another example of President Donald Trump's unprecedented interference in the affairs of American business," notes Reuters. The same opinion is held by Bloomberg.

"I paid zero [dollars] for Intel, and it [the stake] is worth about $11 billion. It all goes to the U.S. Why are the 'stupid' people not happy about it?" - Trump took umbrage in a post on the social media network Truth Social on Monday. - I am willing to make these deals for our country every day. I will also support those companies that make such good deals with the United States. I love it when their stock goes up in value - it makes the United States richer and richer. More jobs for America! Who wouldn't want to make deals like that?"

"I paid zero [dollars] for Intel, and it [the stake] is worth about $11 billion. It all goes to the U.S. Why are the 'stupid' people not happy about it?" - Trump took umbrage in a post on the social media network Truth Social on Monday. - I am willing to make these deals for our country every day. I will also support those companies that make such good deals with the United States. I love it when their stock goes up in value - it makes the United States richer and richer. More jobs for America! Who wouldn't want to make deals like that?"

President Donald Trump's actions toward Intel and Nvidia represent "a chaotic method of protectionism based on proximity to power," Walter Isaacson, author of a biography of Elon Musk and a professor at Tulane University, told CNBC on Aug. 21. Such an approach won't help revitalize manufacturing in the U.S., he said.

"Such state capitalism often degenerates into clan capitalism, in which individual companies and industries find themselves in a privileged position, in effect paying tribute to the leader. This is a path not just to disaster, but to corrupt chaos," Isaacson said on the TV channel.

The professor's comments followed a series of decisions by the U.S. government to interfere in the business of private companies. For example, Nvidia and AMD agreed to transfer 15% of their proceeds from chip sales in China to the U.S. government as payment for export licenses to supply certain chips. Prior to that, Trump secured a "golden share" in U.S. Steel when it was purchased by Japanese steel giant Nippon Steel. Such a share gives its owner veto power and the ability to participate in key company decisions.

Bloomberg sources first reported on August 14 that the U.S. government was considering buying a stake in Intel. A few days later, the sources told the publication that the U.S. government was considering converting part or all of the grants allocated to Intel under the CHIPS and Science Act into an equity stake.

The White House did not specify with which other companies similar discussions may be underway. However, a Bloomberg source said that chipmakers that are increasing commitments to invest in the U.S., like Taiwan Semiconductor Manufacturing (TSMC) and Micron, would not be under similar pressure to swap equity stakes for financing, Bloomberg adds.

This article was AI-translated and verified by a human editor