Intel ‘s investors could end up getting burned by the Trump administration’s decision to back the chipmaker through a direct equity stake, according to some Wall Street analysts who cover the struggling company. The federal government’s 10% stake in Intel does not come with a board seat or any governance rights. But Uncle Sam’s financial backing could still steer the chipmaker in directions that ultimately harm the interests of shareholders.finter “Based on what we know so far, we don’t consider this to be a positive for INTC shareholders,” Wolf Research equity analyst Chris Caso, who covers the semiconductor industry, told his clients this week. Intel has essentially become a vehicle for U.S. industrial policy and investors will be taken along for the ride, Caso said. The chipmaker is now locked into a path where it will be forced to invest in manufacturing capacity even if demand hasn’t materialized and the return on investment is low, he said. “While this deal provides INTC with the cash it needs to invest and to keep the business afloat, it won’t improve the ROI of that investment,” Caso said. The market is also not that enthusiastic with Intel’s stock up less than 3% since the Trump administration announced its investment last Friday. Capital discipline Intel CEO Lip-Bu Tan had promised investors that he would be more prudent with the chipmaker’s capital and spend money on new manufacturing capacity only when he can ensure a solid return. “I do not subscribe to the belief that if you build it, they will come,” Tan said on Intel’s July earnings call, before the government bought an equity stake. “Under my leadership, we will build what customers need, when they need it, and earn their trust to consistent execution.” Tan’s promise of capital discipline is likely no longer the case given government’s stake in Intel, Caso said. Many investors were hoping Intel would divest some of its manufacturing and focus more on designing chips, Loop Capital managing director Gary Mobley told clients this week. But Uncle Sam’s stake comes with an agreement that incentivizes Intel to keep majority ownership of its foundry business, Mobley said. “There is a protective covenant as part of the U.S. investment that incentivizes INTC to retain majority ownership of INTC, so don’t expect an imminent separation of INTC Products from INTC Foundry,” Mobley said. Intel’s own warning Intel this week disclosed to investors the risks it sees from the deal. The chipmaker warned in a filing that the U.S. government stake could hurt its international sales, which accounted for 76% of the company’s revenue on 2024. Intel might now face more regulations, obligations or restrictions when operating in other countries, it said. Intel acknowledged that “it is difficult to foresee all the potential consequences” given that there are so few recent precedents for the U.S. taking an equity stake in a publicly traded company. “There could be adverse reactions, immediately or over time, from investors, employees, customers, suppliers, other business or commercial partners, foreign governments or competitors,” Intel told investors in the filing. “There may also be litigation related to the transaction or otherwise and increased public or political scrutiny with respect to the Company.” The bull case for Intel would be the Trump administration pressuring chipmakers to use Intel as a foundry, Caso said. But this is bad policy and difficult to achieve, he said. “Forcing US chipmakers to use a foundry they otherwise wouldn’t have will reduce their competitiveness, and would also represent a bad deal for shareholders of INTC’s foundry customers,” he said. The U.S. government stake doesn’t solve Intel’s fundamental problems, TD Cowen’s Joshua Buchalter told clients this week. Intel’s technology is viewed by customers as lagging behind Taiwan Semiconductor Manufacturing . “Net, it remains difficult for us to gain confidence in the immediate and long-term path forward,” Buchalter said. “Roadmaps and customer confidence are not (re)built overnight, and the strategy seems very much in flux.”
