Trump’s $9B stake won’t save Intel without new clients

President Donald Trump plans to put nearly $9 billion into Intel for a 9.9% stake. But analysts say the money, already earmarked under a federal program, won’t revive Intel’s contract chipmaking unless it wins outside customers for its new 14A process.

Chief Executive Lip Bu Tan, who took over in March, cautioned last month that Intel might exit contract chipmaking if it fails to secure major clients. “Going forward, our investment in Intel 14A will be based on confirmed customer commitments,” he said.

Summit Insights’ Kinngai Chan stressed that scale is critical to the unit’s viability.

He said “Intel must secure enough customers’ volume to go to production for its 18A and 14A nodes to make its foundry arm economically viable,” and “we don’t think any government investment will change the fate of its foundry arm if they cannot secure enough customers.”

Intel lags behind rivals in advanced chips

TSMC leads in advanced process technology and Nvidia dominates AI chips. To win orders, Intel must demonstrate consistent, high-yield production at the leading edge. The 18A process, less advanced than 14A, is reportedly dealing with yield challenges, meaning too few chips are meeting spec.

Chipmakers like TSMC often absorb early low-yield costs when ramping new nodes for big customers such as Apple. With six straight quarters of net losses, Intel has less room to shoulder those expenses and still turn a profit.

“If the yield is bad then new customers won’t use Intel Foundry, so it really won’t fix the technical aspect of the company,” said Ryuta Makino, an analyst at Gabelli Funds, which holds Intel shares.

As noted in a Reuters report Makino still expects yields to improve over time, but views the equity move as less favorable than simply receiving CHIPS Act support as originally outlined under the Biden Administration. “This isn’t free money,” he said.

Intel said the federal government will not take a board seat and will align its votes with the company’s directors on matters requiring shareholder approval, with “limited exceptions.” The shares for Washington will be issued at a 17.5% discount to Friday’s close.

The purchase would make the U.S. government Intel’s largest shareholder, though neither Trump nor Intel specified when the deal will close. Intel’s stock rose 5.5% Friday on the news, then slipped 1% in after-hours trading once the terms were released. Year-to-date, the shares are up 23% as Tan has announced sizable job cuts.

Deal signals unusual White House role in corporate Affairs

The move, reported earlier by Cryptopolitan, represents another atypical White House intervention in corporate affairs and aligns with Trump’s push to expand domestic production and jobs. It follows remarks earlier this month in which Trump called Tan “highly conflicted” over ties to Chinese firms and urged his resignation, before later reversing his stance.

Some analysts argue that federal backing could still help as Intel builds out its factories. Intel says it has more than $100 billion earmarked for U.S. expansion and expects high-volume production to start later this year at its Arizona site. “To have access to capital and a new partial owner that wants to see you succeed are both important,” said Peter Tuz, president of Chase Investment Counsel.

Intel says the government’s $8.9 billion comes on top of $2.2 billion already granted, for $11.1 billion total. The deal also gives the government a five-year option to buy 5% more Intel shares at $20 each if Intel’s stake in the foundry falls below 51%.

The announcement comes on the heels of a $2 billion infusion from SoftBank earlier this week. “This is a great deal for America and, also, a great deal for Intel. Building leading edge semiconductors and chips, which is what Intel does, is fundamental to the future of our nation,” Trump said on Friday.

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