Biden Administration's $7.86 Billion Bet on Intel Sparks Investor Optimism
1min read In a pivotal move, the Biden administration has finalized a subsidy agreement for Intel, greenlighting up to $7.86 billion in direct funding. This decision comes after extended deliberations and marks a significant, albeit reduced, investment compared to the initially proposed $8.5 billion. Prior to the market opening, Intel's stock experienced nearly a 2% uptick, reflecting investor optimism.
The U.S. Department of Commerce will provide this financial support under the CHIPS Act to bolster Intel's commercial semiconductor manufacturing initiatives. This marks the largest governmental subsidy directed toward advanced chip production in the United States. Such funding is intended to fuel Intel's ambitious manufacturing and advanced packaging projects across Arizona, New Mexico, Ohio, and Oregon. Furthermore, Intel is expected to benefit from an investment tax credit from the Treasury Department, potentially covering up to 25% of eligible investments exceeding $100 billion.
The finalization of this subsidy was a critical objective for Intel, a company that has faced challenges convincing both Wall Street and government entities of its capability to execute large-scale manufacturing expansions amidst financial struggles and technological delays. Pat Gelsinger, Intel’s CEO, reaffirmed the company’s commitment to investing in U.S. operations despite announcing recent workforce reductions and delaying the opening of a significant Ohio-based factory.
The reduction in the direct subsidy amount is partly influenced by a separate $3 billion military chip manufacturing contract with the Department of Defense. Despite opting out of federal loans, the company remains poised to secure $11 billion in federal low-interest loans alongside tax incentives, supporting key projects such as new wafer fabs in Arizona and Oregon.
This funding comes at a critical juncture as the Biden administration seeks to cement industrial policy achievements before the next presidential election cycle. The subsidy package also signals an administration effort to reinforce domestic semiconductor capabilities, aiming to reduce dependency on foreign suppliers and strengthen national security.