Intel agrees to give US government $8.9B stake in its company

Chipmaker Intel has agreed to give the U.S. government a nearly 10% stake in its business.

Intel, which has a major research and development campus in Hillsboro, Oregon, said in a statement the U.S. government will buy $8.9 billion in Intel common stock.

Nearly $6 billion of that will be funded with previously awarded, but not yet paid, grants from the U.S. CHIPS and Science Act, according to the company.

“President Trump’s focus on U.S. chip manufacturing is driving historic investments in a vital industry that is integral to the country’s economic and national security,” Intel CEO Lip-Bu Tan said in the statement.

“We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership.”

Intel said the government’s investment will not include voting or governance power.

Speaking with reporters on Friday, Trump said the deal came out of a meeting last week with Intel CEO Tan — which came days after the president called for him to resign over his past ties to China.

“I said, I think it would be good having the United States as your partner,” Trump said. “He agreed, and they’ve agreed to do it.”

The struggling Silicon Valley chipmaker has a market cap of just over $100 billion. The agreement comes after Japanese technology giant SoftBank Group said Monday it’s accumulating a 2% stake in Intel.

Intel is headquartered in California but considers its Hillsboro campus the heart of its research and development. The semiconductor firm employs around 18,000 people in Oregon, making it among the state’s largest private employers.

Once the world’s top chipmaker, Intel fell behind in the race to develop technology for smartphones and artificial intelligence. The company reported a loss of nearly $19 billion last year, after recording a $1.7 billion profit in 2023.

Tan was brought on as CEO to help the company catch up. Since he took over at the helm earlier this year, the company has announced it would slow down manufacturing and shed thousands of jobs. Last month the company told Oregon officials it was cutting nearly 2,400 positions from its facilities in Washington County.

Commerce Secretary Howard Lutnick foreshadowed the announcement of the government’s stake in Intel in an interview on CNBC earlier this week. It drew criticism from both of Oregon’s U.S. Senators.

“This is nothing more than corporate extortion from Donald Trump and his cabinet of bobbleheads acting more like a mob family squeezing out protection money than an administration working in our economy’s best interests,” Sen. Ron Wyden, a Democrat, said in a statement to OPB on Wednesday.

Sen. Jeff Merkley, D-Oregon, said the move would hurt the semiconductor industry instead of help give it a needed boost.

“This latest scheme is nothing more than an attempt to distract from Trump’s chaotic tariff and trade policies that are hurting American businesses and consumers and causing chaos in the market,” Merkley said in a statement.

What’s happening?

The Trump administration has been in talks to secure a stake in Intel in exchange for converting government grants that were pledged to Intel under President Joe Biden. The deal makes U.S. government one of Intel’s largest shareholders, and blurs the traditional lines separating the public sector and private sector in a country that remains the world’s largest economy.

Why would Trump do this?

In his second term, Trump has been leveraging his power to reprogram the operations of major computer chip companies. The administration is requiring Nvidia and Advanced Micro Devices, two companies whose chips are helping to power the craze around artificial intelligence, to pay a 15% commission on their sales of chips in China in exchange for export licenses.

Trump’s interest in Intel is also being driven by his desire to boost chip production in the U.S., which has been a focal point of the trade war that he has been waging throughout the world. By lessening the country’s dependence on chips manufactured overseas, the president believes the U.S. will be better positioned to maintain its technological lead on China in the race to create artificial intelligence.

Didn’t Trump want Intel’s CEO to quit?

That’s what the president said Aug. 7 in an unequivocal post calling for Intel CEO Lip-Bu Tan to resign less than five months after the Santa Clara, California, company hired him. The demand was triggered by reports raising national security concerns about Tan’s past investments in Chinese tech companies while he was a venture capitalist. But Trump backed off after Tan professed his allegiance to the U.S. in a public letter to Intel employees. Tan also went to the White House to meet with the president, who applauded the Intel CEO for having an “amazing story.”

Why would Intel do a deal?

Intel may have little choice because it is currently dealing from a position of weakness. After enjoying decades of growth while its processors powered the personal computer boom, the company fell into a slump after missing the shift to the mobile computing era unleashed by the iPhone’s 2007 debut.

Intel has fallen even farther behind in recent years during an artificial intelligence craze that has been a boon for Nvidia and AMD. The company lost nearly $19 billion last year and another $3.7 billion in the first six months of this year, prompting Tan to undertake a cost-cutting spree. By the end of this year, Tan expects Intel to have about 75,000 workers, a 25% reduction from the end of last year.

Is this deal unusual?

Although rare, it’s not unprecedented for the U.S. government to become a significant shareholder in a prominent company. One of the most notable instances occurred during the Great Recession in 2008 when the government injected nearly $50 billion into General Motors in return for a roughly 60% stake in the automaker at a time it was on the verge of bankruptcy. The government ended up with a roughly $10 billion loss after it sold its stock in GM.

Would the government run Intel?

“The government’s investment in Intel will be a passive ownership, with no Board representation or other governance or information rights,” Intel said in its statement about the deal. “The government also agrees to vote with the Company’s Board of Directors on matters requiring shareholder approval, with limited exceptions.”

U.S. Commerce Secretary Howard Lutnick told CNBC during a Tuesday interview that the government has no intention of meddling in Intel’s business, and will have its hands tied by holding non-voting shares in the company.

But some analysts wonder if the Trump administration’s financial ties to Intel might prod more companies looking to curry favor with the president to increase their orders for the company’s chips.

What government grants does Intel receive?

Intel was among the biggest beneficiaries of the Biden administration’s CHIPS and Science Act, but it hasn’t been able to revive its fortunes while falling behind on construction projects spawned by the program.

The company has received about $2.2 billion of the $7.8 billion pledged under the incentives program.