President Trump said his administration will take a 10% stake in ailing chip giant Intel (INTC) on Friday, calling it a “great deal.”
Intel stock price rose more than 5% in midday trading.
On Tuesday Treasury Secretary Scott Bessent told CNBC that the administration was exploring converting Intel’s funding from the Biden-era CHIPS Act into equity aimed at stabilizing the company’s US manufacturing business.
Intel is dealing with mutiple issues across its businesses. It’s manufacturing division is bleeding cash, just as its legacy computer chip segment forfeits market share to rivals Advanced Micro Devices (AMD) and Qualcomm (QCOM) in the PC space. Intel is also woefully behind AMD and Nvidia (NVDA) in the AI race.
The company’s market capitalization of $111 billion is less than half of its value in 2021. And CEO Lip-Bu Tan has been forced to lay off 15% of the company’s workforce and shelve plans to build plants in Europe.
But the troubled chipmaker is the only large-scale US-based leading-edge chip manufacturer, giving it geopolitical significance as the nation looks to reshore semiconductor production.
Trump’s announcement comes the same week that SoftBank Group announced a $2 billion investment in Intel.
All of this comes as Intel continues to navigate its rocky turnaround plan that began under previous CEO Pat Gelsinger. Current CEO Lip-Bu Tan has scaled back Gelsinger’s original vision, canceling construction of international plants and further delaying Intel’s $20 billion Ohio chip complex.
Intel is fighting to bring customers into its third-party chip foundry business as it works to scale its newest 18A chip technology. The company has already signed agreements to build chips on its technology with Microsoft (MSFT) and Amazon (AMZN), but Intel is still the foundry business’s largest customer.
The company is also contending with losing market share in the server business and client computing business to rival AMD, which also benefits from its own AI business. Intel has effectively been shut out of the AI race due to a lack of innovation compared to AMD (AMD) and Nvidia (NVDA).
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X/Twitter at @DanielHowley.
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