SAN FRANCISCO (AP) — U.S. Commerce Secretary Howard Lutnick on Tuesday confirmed the U.S. government is vying for a 10% stake in Silicon Valley pioneer Intel in an unusual deal that would deepen the Trump administration’s financial ties with major computer chip manufacturers and punctuate a dramatic about-face from the president’s recent push to oust the company’s CEO.
The ambitions that Lutnick confirmed in a televised interview with CNBC came the day after various news outlets reported on the negotiations between the Trump administration and Intel. The investment would be made by converting federal government grants previously pledged under President Joe Biden's administration into a bushel of Intel stock that would turn the U.S. government into one of the company's largest shareholders.
“We think America should get the benefit of the bargain,” Lutnick told CNBC as he explained why President Donald Trump is pushing for the deal. “It's obvious that it's the right move to make.”
Intel declined to comment on the negotiations with the Trump administration.
The notion of the U.S. government holding a huge stake in Intel would have seemed inconceivable back in the company's heyday when its processors were powering a personal computer boom that began in the mid-1970s. But Intel has been mired in tough times after missing mobile computing era unleashed by the iPhone’s 2007 debut.
Intel has fall even farther behind in recent years during an artificial intelligence craze that has been a boon for two of its once-smaller rivals, Nvidia and Advanced Micro Devices. The Trump administration is hitching a ride on their success by imposing a 15% commission on their sales of their chip sales in China in exchange for their export licenses. Those fees are expected to translate into billions of dollars in additional government revenue.
The U.S. government's negotiations to become a major Intel shareholder are coming on a heels of a $2 billion investment Japanese technology giant SoftBank Group disclosed late Monday that it plans to make in the Santa Clara, California, company. Softbank is accumulating its 2% stake in Intel at $23 per share — a slight discount from the stock's price when its investment was announced.
Intel's shares surged nearly 7% to $25.32 in Tuesday's early afternoon trading on the news of Softbank's big bet on Intel, coupled with Trump's designs on the company.
SoftBank invests in an array of companies that it sees as holding long-term potential. It has been stepping up investments in the United States since Trump returned to the White House. In February, its chairman Masayoshi Son joined Trump, Sam Altman of OpenAI and Larry Ellison of Oracle in announcing a major investment of up to $500 billion in a project to develop artificial intelligence called Stargate.
“Semiconductors are the foundation of every industry, Son said in a statement. ”This strategic investment reflects our belief that advanced semiconductor manufacturing and supply will further expand in the United States, with Intel playing a critical role.”
Trump's interest in Intel is also being driven by his desire to boost chip production in the U.S., which has been a focal point of the trade war that he has been waging throughout the world since he returned to the White House earlier this year for his second term in office. “We want Intel to be successful in American,” Lutnick said during his CNBC interview.
Boosting domestic production of computer chips also ranked high on the Biden administration's agenda, which resulted in the 2022 passage of the CHIPS and Science Act.
Intel was among the biggest beneficiaries of the program, but it hasn't been able to revive its fortunes while falling behind on construction projects spawned by the CHIPS program. The company has received about $2.2 billion of the $7.8 billion pledged under the incentives program — money that Lutnick derided as a “giveaway” that would better serve U.S. taxpayers if it's turned into Intel stock, which he said would be in the form of non-voting shares so the government wouldn't be able to use the stake to sway how the company is managed.
But Intel's ongoing struggles also means the U.S. government is taking on a risky investment. The company is in the midst of its latest turnaround attempt under CEO Lip-Bu Tan, who was hired in March to shake things up. Tan’s turnaround effort so far has been focused on a cost-cutting spree that is gutting the company’s workforce and further delaying construction on a chip plant in Ohio that has been in the works since 2022.
Intel’s market value is hovering around $110 billion, only a slight uptick from where it was when Tan arrived and leaving it more than 60% below its peak reached about a quarter-century ago during the early phase of the internet boom.
In another strange twist to the new alliance, President Donald Trump had demanded that Tan resign in an August 7 post spurred by concerns about investments that Tan had made in China chipmakers while he was working as a venture capitalist.
But Trump backed off after the Malyasia-born Tan professed his allegiance to the U.S. in a public letter to Intel employees and went to the White House to meet with the president, who applauded the Intel CEO for having an “amazing story.” That truce apparently sparked the negotiations that may culminate in the U.S. government owning a chunk of Intel.
Although rare, it’s not unprecedented for the U.S. government to become a significant shareholder in a prominent company. One of the most notable instances occurred during the Great Recession in 2008 when the government injected nearly $50 billion into General Motors in return for a roughly 60% stake in the automaker at a time it was on the verge of bankruptcy. The government ended up with a roughly $10 billion loss after it sold its stock in GM.
—-
Kurtenbach reported from Bangkok.
