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For a party of small government and free markets, the Republican White House is certainly getting cozy with the private sector.
On Friday, Intel confirmed that the US government is taking a 10% stake worth roughly $8.9 billion in the chipmaker, sending shares of the company soaring 6% that day. $5.7 billion of the deal will come from grants previously awarded through the 2022 CHIPS Act, with the remaining $3.2 billion coming from a separate government award.
Catching up: You might remember President Trump calling for Intel CEO Lip-Bu Tan to resign only a few short weeks ago, so it might give you whiplash to see Tan looking quite cheerful alongside Commerce Secretary Howard Lutnick.
But while the US government argues the deal is a national security priority, it’s also a boon for beleaguered Intel, which has been struggling to keep up with rivals like AMD and Nvidia in the AI arms race. On the flip side, some argue the deal can’t provide Intel with what it really needs—new customers—and that White House intervention introduces new risks.
Sovereign and wealthy?
This isn’t just about Trump and Lip-Bu Tan brushing conflict under the rug faster than the most toxic couple you know. In fact, the federal government’s relationship with the private sector could be undergoing a massive shift.
Back in February, Trump signed an executive order establishing a sovereign wealth fund. Since then, the federal government has been on a spending spree: The Pentagon inked a deal to become the largest shareholders of rare-earths minder MP Materials, the White House allowed Nvidia and Advanced Micro Devices to export chips to China as long as it gets 15% of those revenues, and way back in June, the federal government approved Nippon Steel’s acquisition of US Steel in exchange for a “golden share.”
While there’s a historical precedent for the US government taking stakes in private companies (for example, the Federal Housing Finance Agency taking over Freddie Mac and and Fannie Mae during the 2008 financial crisis), creating an entire fund for the government to invest in private companies is a whole different ballgame—and this stake in Intel is only the first inning.—LB