Why the Government's Intel Investment Is Dangerous
When President Trump and the White House announced their investment in struggling semiconductor firm Intel (INTC), the stock initially held the $25.00 level. By the end of the day on Monday, shares slipped to close at $24.55.
On Monday, Trump told reporters that he wanted to make more of such similar deals. This is a dangerous precedent.
Intel is a failing firm that lost its way. Over the years, executives increased debts as they acquired companies that did not strengthen the core business. During the Biden Administration, the company applied for, and received, funding from the CHIPS Act. Plans to build fabs ended when the new CEO, Lip-Bu Tan, announced cost cuts. He would not build plants unless the company had orders.
Intel is far behind in the AI server market, dominated by Advanced Micro Devices (AMD), SMCI (SMCI), and Nvidia (NVDA). In the AI chip and GPU gaming markets, Intel does not have a meaningful market share. Ironically, Intel’s GPU Arc product has promise.
Arc is a money-losing unit that may potentially outflank the competition. Intel needs to aggressively compete in the GPU sector. It needs consumers to adapt its platform, choosing better value hardware over Nvidia’s proprietary CUDA.
The government’s involvement in the equity market adds risks for investors. While shareholders in MP Materials (MP) benefited, others might not. With Intel, investors should avoid companies that lack innovation while getting the government to invest in their shares.
