Intel's advantages from a Trump deal could be worth as much as the money

Yahoo

12 hours ago

What would it take for Intel (INTC) to turn its business around? Caught flatfooted by the explosion of AI, analysts have called on the ailing company to get out of the chip manufacturing business or reconsider its approach to its third-party chip foundry.
As the nation's last premier chipmaker, Intel's standing goes beyond its modest market cap. The company's importance is tied to national security interests and increasingly relevant discussions about technological sovereignty and an AI arms race.
In that context, it's easier to see why the White House would take such an interest in Intel — literally and figuratively. The Trump administration is in discussions to take a roughly 10% stake of the company, according to multiple reports, becoming the chipmaker's largest shareholder by turning billions in CHIPS Act grants into partial ownership.
But the government potentially using funding for equity goes beyond the money. It signals the administration's ambitions to revive domestic semiconductor manufacturing, even as such a deal challenges free market principles around private sector decision making and the free flow of capital.
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Intel continues to struggle in the early stages of its new leadership under CEO Lip-Bu Tan. Last month, the company reported revenue that was flat for the quarter, while losses grew from $1.6 billion a year ago to $2.9 billion, representing the sixth consecutive quarterly finish in the red.
While Intel missed the initial stages of the AI transition, leaving the company stuck with an outdated business model, Tan has embarked on a turnaround mission to churn out chips for the booming AI market, among other updates to its lineup.
Adding to the market-moving reports about a possible government intervention, Intel shares surged as much as 9% on Tuesday following the announcement that SoftBank Group (SFTBY) will take a $2 billion stake in the chip giant.
For Intel, the cash is undeniably good. But the benefits of having the explicit backing of the Trump administration? As Billy Crudup says in the Mastercard ads, "Priceless."
Treasury Secretary Scott Bessent has said any US investment in Intel would be aimed at helping the company stabilize its business, and that the government would not force other companies to buy chips from Intel. But if the 2025 trade war is any indication, there are many ways for the administration to help a company's fortunes without explicitly forcing CEOs or state leaders to do anything.
An ask from the Oval Office bears a different level of power, of course. Dealmaking is part of the administration's brand, though — just ask Boeing (BA), Nippon Steel (NPSCY), Nvidia (NVDA), or Coca-Cola (KO).
Whether using a company's business as a bargaining chip, extracting revenue for export deals, or getting a new soda variant, Trump has convinced and cajoled business leaders to do his bidding with minimal pushback. He's picking winners and losers to help achieve his policy aims. And from corporate America's perspective, it's useful to have the president on their side. Or rather, to not be on his bad side.
It helps to have a high-performing business. But if you're struggling with that, having friends in the highest places can sometimes do the trick.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
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