Intel Receives $8.9B Investment from US Govt to Prevent Chip Manufacturing Sale

Intel has received an $8.9 billion investment from the US government to prevent the sale of its chip manufacturing division. The investment includes a 9.9% stake and a five-year warrant allowing the government to purchase an additional 5% stake at $20 per share if Intel's holdings in the "wafer foundry business" fall below 51%. Intel's CFO believes it is unlikely to reduce its stake below 50% and is focused on acquiring clients for its next-generation 14A manufacturing process.

Intel has received an $8.9 billion equity investment from the U.S. government to prevent the sale of its chip manufacturing division. The investment includes a 9.9% stake and a five-year warrant allowing the government to purchase an additional 5% stake at $20 per share if Intel's holdings in the "wafer foundry business" fall below 51% [1].

The U.S. government's investment, which amounts to passive ownership, reflects a strategic move to bolster domestic semiconductor production. The investment is being funded by $5.7 billion in unpaid grants previously awarded to Intel as part of the U.S. CHIPS and Science Act, plus $3.2 billion from the Defense Department's Secure Enclave program [1].

Intel's CFO believes it is unlikely to reduce its stake below 50%, and the company is focused on acquiring clients for its next-generation 14A manufacturing process. This fresh government support means Intel can shelve plans to raise outside capital, freeing it up to focus on innovation and restructuring [3].

The investment has been described as a "moderate vote of confidence" by Bank of America analysts, who expect Intel's net leverage to improve by 0.3x–0.4x in 2025 and 2026, to 1.5x and 1.2x, respectively. However, free cash flow estimates are lowered by $3 billion in 2025 and $2 billion in 2026 to reflect the shift in grant accounting [2].

For markets, the deal lets Intel dodge the extra costs and risks of raising fresh funds in a tough market for chip stocks. That backing means more money to put toward next-generation manufacturing, helping it better compete with the likes of TSMC and Samsung [3].

The U.S. government's stake in Intel amounts to passive ownership, meaning it can't directly influence the chip maker's operations, at least not as part of this deal. It will not have any Board representation or other governance or information rights, Intel said [1].

This is the latest in a series of unusual and unprecedented moves by the Trump Administration to become more directly vested in U.S. chip manufacturing and operations. Earlier this month, it was announced that both AMD and NVIDIA agreed to pay the U.S. government 15% of all revenues derived from AI chip sales to China, effectively giving the firms a green light to ship the former's Instinct MI308 and the latter's Hopper H20 silicon to the Chinese market [1].

References:
[1] https://hothardware.com/news/intel-trump-deal-89b-investment-us-chip-manufacturing
[2] https://finance.yahoo.com/news/unlikely-intel-spins-sells-foundry-130829632.html
[3] https://finimize.com/content/intel-secures-government-support-to-keep-its-chipmaking-close-to-home