Trump's Bold Move: Investing in a Troubled AI Giant
The Trump administration may inject new life into Intel, aiming to shift semiconductor dependency away from Taiwan.
In an unexpected yet strategic maneuver, the Trump administration is reportedly considering making the U.S. government the largest shareholder in Intel, transforming billions in CHIPS Act grants into a 10% stake. This could redefine the longstanding public-private partnership landscape while also aiming to resurrect a declining Silicon Valley icon.
Intel’s Struggles and Strategic Recovery
Once a powerhouse in the technology sector, Intel’s stock has plummeted by over 60% from its 2021 peak. Blunders during the AI boom, consistent manufacturing delays, and fierce competition from Nvidia and AMD have left it in a precarious position. The company has warned of layoffs after six consecutive quarters of losses.
Yet, the Trump administration sees an opportunity here—both in terms of national security and political gain. Treasury Secretary Scott Bessent believes this investment could prevent Taiwan from monopolizing the global semiconductor supply chain, thus reducing vulnerability.
Political Intrigue and Corporate Maneuvering
The intrigue heightened when President Trump, on Truth Social, demanded the resignation of Intel’s CEO, Lip-Bu Tan, citing conflicts of interest related to his investments in Chinese semiconductor firms. However, a subsequent meeting in the Oval Office resulted in President Trump describing the encounter as “interesting” and highlighting Tan’s accomplishments. Soon after, Intel secured a $2 billion investment from SoftBank, whose CEO, Masayoshi Son, is well-connected with Trump.
A Glimmer of Hope for Intel
Despite skepticism from Wall Street, the potential government backing presents a glimmer of hope for Intel’s recovery. Some analysts foresee a faster turnaround if federal funds effectively enhance Intel’s enterprise value and future government contracts boost its EBITDA.
Investment Implications: A Wise Move?
While Intel’s potential for immediate gains might not rival those of Nvidia or Broadcom, the anticipated governmental backing could make Intel a more attractive long-term investment. Estimated future operating cash flows place Intel’s stock at potentially $30 by 2027, assuming the company realizes the upper end of these estimates.
Ultimately, the Trump administration’s involvement could marry Intel to a pivotal role in diminishing the U.S.’s dependency on Taiwan for semiconductors, opening the door to favorable news over the next three and a half years.
As stated in 24/7 Wall St., the scenario unfolding is dynamic, promising a fascinating tug-of-war between opportunity costs and strategic benefits in the ever-evolving tech sector.