Trump administration may get 10% of Intel stock. Why did the stock plummet?

The administration of President Donald Trump is negotiating to acquire about 10% of shares of chipmaker Intel, Bloomberg reports citing its sources. In this case, the U.S. government will become the largest shareholder of the struggling company. However, the chipmaker may not receive new investments, which investors were counting on. Against this background, Intel shares fell in price by almost 4%.

According to Bloomberg, the U.S. government is considering the option of converting some or all of the grants allocated to Intel under the CHIPS and Science Act into an equity stake. Under this law, the U.S. Department of Commerce subsidizes chipmakers developing domestic production. The total amount of these subsidies, intended for commercial and military production of Intel, is $10.9 billion. And this is about as much as 10% of the company may be worth at the current capitalization of the chipmaker, notes Bloomberg.

According to the agency's sources, the final size of the share that the White House may receive and the decision on the implementation of this plan are not finalized yet. Discussions continue in a closed format.

White House spokesman Kush Desai declined to comment to Bloomberg on the details of the talks, saying only that no decision would be considered final until an official announcement is made. Intel and the U.S. Department of Commerce, which oversees implementation of the CHIPS Act, also refrained from commenting.

Intel shares fell 3.7% to $23.7 in trading Monday. They remain up 18% since the beginning of the year.

The main question is whether state support will help revitalize Intel's business, which has been suffering from sluggish sales and operating losses in recent years, Bloomberg explains. The company lost its technological leadership in the industry and has not yet been able to regain it.

If CHIPS Act funds are indeed used to purchase the company's share, it does not necessarily mean an increase in the amount of state aid, but rather an acceleration of the timing of its disbursement, the agency says. As with other grantees, CHIPS Act funds must be disbursed in phases - as agreed-upon milestones for construction and startup of facilities are reached. Most of the 2022 Act grants were distributed under the Biden administration. As of January 2025, Intel has received $2.2 billion of the $10.9 billion in planned grants.

It's unclear whether that amount would be included in a potential stake, whether the company has received additional tranches since Trump took office, and what the payment schedule would be if it moves to equity, Bloomberg summarizes.

Intel CEO Lip-Bu Tan met with Donald Trump at the White House last week. Earlier, the president criticized Tan for ties with China and even called for his resignation. After the meeting, however, Trump abruptly changed his tone, calling Tan "a man with an amazing story." According to Bloomberg's sources, Tan's resignation as Intel CEO is not under consideration. The idea of acquiring a stake in Intel came after Trump met with Lip-Bu Tan, Bloomberg wrote Thursday. Investors reacted to the news with optimism: the chipmaker's shares rose that day by almost 7%.

Intel's future has been a concern for the Trump administration since its return to the White House. In recent years, the company has lost ground to industry leader TSMC, which specializes in producing advanced chips used in smartphones, servers and artificial intelligence systems.

Although TSMC and South Korea's Samsung Electronics are already building plants in the U.S., having a U.S. company capable of producing advanced chips domestically remains a priority for both the Trump administration and the previous Biden government, Bloomberg explains.

The purchase of a stake in Intel by the US government will not solve the company's fundamental problems, says Bernstein analyst Stacey Rasgon. According to the analyst, the chipmaker needs a strategic vision rather than funding, and it is unclear how the government can help with that. So far, the company's current plan to launch five advanced manufacturing processes in four years is not going well, the analyst emphasized.

"Without a clear technological vision, this whole endeavor will be economically tantamount to simply burning tens of billions of dollars," Rasgon wrote. He also notes that it's not yet clear exactly what Trump expects from Intel in return. The U.S. government has already agreed with chipmakers Nvidia and Advanced Micro Devices to receive 15% of their revenue from AI chip sales in China. And mining company MP Materials will give the Defense Department 30% of profits above a price floor on rare earth oxide sales - after the agency bought a large stake in the manufacturer.

"Let's see if Intel manages to get better terms out of him [Trump]," Rasgon wrote on Aug. 15.

The closest historical precedent is government involvement in the Wall Street bailout during the 2008-2009 financial crisis, when the U.S. government took a large stake in insurance giant American International Group (AIG), Barron's wrote Aug. 15. Deeming AIG "too big to fail," the authorities provided the company with loans and capital totaling about $182 billion, and eventually exited that investment with a $23 billion profit in 2012.

Intel's comparison with AIG stems from its systemic importance: the company plays a critical role in the U.S. economy, especially in the technology sector, as the largest chip maker combining development and manufacturing "under one roof," the publication explains.

Although Intel posted a loss of about $2.9 billion last quarter, its credit rating is still at investment grade, Barrons writes, and its market capitalization exceeds $100 billion.

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