To The Moon

The White House confirmed on Tuesday that the Trump administration is negotiating a deal that would give the US government roughly a 10 % ownership stake in chip giant $Intel(INTC)$.

“The president wants to put America’s needs first—both from a national-security and an economic standpoint,” White House Press Secretary Karoline Leavitt told reporters.

Commerce Secretary Howard Lutnick said the prospective transaction could involve converting federal grants into Intel stock.

This highly unusual move could benefit Intel—especially as it struggles to compete with $NVIDIA(NVDA)$ , $Samsung Electronics Co., Ltd.(SSNLF)$ and $Taiwan Semiconductor Manufacturing(TSM)$ in the booming AI-chip market. Intel’s shares spiked as much as 11 % on the news before settling up nearly 7 %.

See from 1 year return chart, $Intel(INTC)$ has staged a sharp rebound in August.

1. Why does the US government want an equity stake?

• AI’s take: The administration is not seeking a traditional financial return; the motivation is national security, supply-chain resilience and industrial policy.

• Secure the semiconductor supply chain
  Intel is the most important US-based chip manufacturer, with strategic value in leading-edge nodes such as Intel 14A. A stake helps ensure continued investment in advanced fabs and reduces dependence on Asian foundries (Taiwan and South Korea).

• Convert CHIPS Act grants into equity
  $Intel(INTC)$ has been awarded up to $10.9 billion in federal subsidies. The Trump team is exploring turning ~$10.5 billion of that—about 10 % of Intel’s current market cap—into equity rather than pure grants. This “grant-for-equity” model supports the company while preserving Washington’s strategic voice.

• Advance “Made in America” policy
  Share ownership gives Washington leverage to expand Intel Foundry Services (IFS) on US soil and entice fabless designers (Apple, NVIDIA, etc.) to bring orders home, reshaping global semiconductor supply chains.

• Prevent technology leakage or strategic drift
  A government stake acts as a “soft constraint,” ensuring Intel’s decisions on export controls or defense chips align with national interest rather than pure profit.

Overall, the proposed stake binds Intel’s fate to national-security and industrial-policy goals—signaling a shift from “subsidy guidance” to “equity engagement.”

Last week Intel declined to comment directly but said it “strongly supports President Trump’s efforts to strengthen American manufacturing and technology.”

On Monday, Japanese investment giant SoftBank announced it will buy $2 billion (£1.5 billion) of Intel stock—analysts see this as a vote of confidence in Intel’s turnaround.

Dan Sheehan of Telos Wealth Advisors warns that political involvement could slow decision-making and reorder priorities, complicating Intel’s already difficult turnaround. Other experts worry the company might be forced to follow a political agenda.

2. Any precedents?

This “grant-for-equity” approach is unprecedented in semiconductors and marks a major pivot in US industrial policy.

The closest analogs are the 2008 financial-crisis rescues, when Washington took large equity stakes in troubled firms:

• $General Motors(GM)$ : $49.5 billion invested, peak ownership 60 %; exited 2013 at ~$10 billion loss.

• $American International Group Inc(AIG)$ : $182 billion rescue, 79.9 % stake; exited 2012 at a profit.

• FiatChryslerAutomobiles: Similar grant-for-equity rescue, later unwound.

In each case the government acted as “lender of last resort” to avert systemic risk, not as an active industrial-policy investor.

3. Investment case and outlook for Intel

3.1 Fundamentals: revenue stabilizing, losses narrowing, but foundry still bleeding

• Latest quarter (Q2 2025)
  – Revenue $12.86 billion vs. $11.92 billion consensus.
  – Net loss $2.9 billion, driven by $3.17 billion loss at Intel Foundry; excluding foundry, legacy PC & data-center businesses near breakeven.
  – Capex ceiling cut from $20 billion to $12 billion for 2025; German and Polish fabs paused, only Ohio 14A line retained—“build after securing big orders.”

• Cash flow
  – Trailing-12-month FCF –$11 billion, but $18 billion cash & equivalents provide near-term cushion.
  – Starting 2026, annual capex intensity could fall >20 %; signing 2–3 Tier-1 customers would create an inflection.

3.2 Valuation: trading below book, pricing in extreme pessimism
The market is pricing in “legacy keeps shrinking + foundry stays loss-making forever.” If foundry can reach $3–4 billion revenue by 2026–27 (management target), re-rating potential is significant.

3.3 Catalysts: government equity + marquee customer wins + node ramp

• Government stake: $10.5 billion grant → 10 % equity boosts book value by $4–5/share and lowers future financing costs; DoD/DoE high-margin orders likely.

• Customer wins: SoftBank already bought $2 billion at 23(+5 $Amazon.com(AMZN)$ AWS and $Microsoft(MSFT)$ evaluating 3/2 nm AI-chip transfers—announcement could push stock to $30–35 quickly.

• Technology: Intel 14A (1.4 nm-equivalent) risk production H2 2026; claims 10 % higher density vs. TSMC N2.

3.4 Risks: competition, execution, macro

• Competition: TSMC N2 locked by Apple/NVIDIA 2026; Samsung 2 nm pricing aggressively.

• Execution: 14A delay would derail 2027 foundry-breakeven target.

• Macro: If global PC demand double-dips H2 2025, legacy earnings miss.

3.5 Street targets & probability-weighted scenarios

My synthesis

• Base (50 %): Legacy EBITDA $7 billion 2025–26, foundry loss-making → fair value $28–32

• Bull (30 %): Foundry signs AWS & reaches breakeven → re-rate to $40–45

• Bear (20 %): 14A slips, PC weakness → revisit <$20

Bottom line: At $25–26 the market discounts perpetual bleeding. Confirmation of the government stake plus first external foundry win could deliver 30 %+ upside over the medium term. Suitable for risk-tolerant investors to accumulate on dips with a stop at $20.