The media are tangled up in their own underwear about this deal, while totally onboard with sacrificing taxpayers on the altar of Biden’s policies.
By Wolf Richter for WOLF STREET.
The Trump Administration announced on Friday that it had extracted a 9.9% stake in Intel, valued at $11.1 billion, in return for the $2.2 billion in grants already paid to Intel under the CHIPS Act, plus $5.7 billion in grants to be paid under the CHIPS Act, plus $3.2 billion to be paid under the Secure Enclave program, which were passed by Congress and signed into law by Biden in August 2022.
So the Biden Administration’s gift to Intel, paid for by taxpayers with love, is now getting converted from a gift into a stake in the company. Intel will issue new shares to the government, which will dilute existing shareholders. But existing shareholders shouldn’t complain, they’re still getting the cash that the Biden Administration had promised them. Intel is expected to do great things in the US with the cash.
If Intel fails, and its shares go to zero, taxpayers will be no worse off than under the Biden deal. But if it thrives and the shares retain their value or gain value, taxpayers are far better off.
Manufacturing chips in the US is crucial. Biden and Trump agreed on that. So how do you get chipmakers to invest in production facilities in the US when each can cost tens of billions of dollars, and when other countries subsidize such investments? Just give them the cash? Loan them nearly free money? Or extract something in return (a stake in the company) for the cash so that the taxpayer doesn’t get totally screwed?
Taxpayers were shanghaied into paying Intel $8.5 billion in grants under the CHIPS and Science Act plus paying Intel a separate $3.5 billion in grants under the Secure Enclave program, plus lending Intel $11 billion, totaling $23 billion in subsidies, of which $12 billion would be cash gifts. Other chipmakers were awarded smaller gifts. The purpose of the CHIPS Act was to stimulate the construction of chip manufacturing plants in the US. Intel’s details were announced in March 2024.
At the time of the Intel announcement, I said:
“We just relish [sarc] those government handouts on a massive scale to the richest companies – sure, we get it, it’s good industrial policy and important for national security to put research, development, and manufacturing of the all-important semiconductors back onto US soil. But how about hitting foreign and US companies that import semiconductors and other products to the US with huge tariffs to pay for the subsidies? But no. So folks, hang on to your wallets. Just kidding. We’re going to borrow it. We’re going to throw it on top of the $34.5 trillion we already owe, and no one is even going to notice it.”
That was in March 2024. The debt is now over $37 trillion.
The actual funds would be disbursed over time in phases upon reaching benchmarks and production goals. By now, Intel has received the first $2.2 billion of the free gifts from taxpayers – thank you, I love you.
These handouts from taxpayers to semiconductor makers were part of the Biden Administration’s industrial policy and national security policy to induce chipmakers to produce semiconductors in the US, rather than in Asia.
And the media were fine with the taxpayer handing some of the richest companies in the world, foreign companies too, tens of billions of dollars in cash gifts to produce in the US. And Wall Street and the companies – the biggest welfare queens of all times – were fine with it too, obviously, because they were getting these taxpayer handouts.
The Trump Administration – after implementing the tariffs I’d clamored for – has largely continued the CHIPS Act, but in rebranded format, and is now trying to actually get something in return for those gifts, so that this taxpayer money doesn’t just get transferred without trace from taxpayers to big companies and their shareholders.
Yet, the media are getting tangled up in their own underwear about this deal, while they were totally onboard with sacrificing taxpayers on the altar of Biden’s policies. That tells you something about who the media root for – it’s not the taxpayer, but Wall Street and the shareholder class.
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You do understand how active ownership of a company in exchange for funding can send a signal to other companies and also influence operations of said company which is different from a one-time grant? Are we China now?
These are the biggest welfare queens in history, benefitting from huge taxpayer wealth-transfers under the Biden administration, and Trump extracts shares from Intel for this cash, and I have to read your BS here? Where were you when the Obama administration took huge stakes in GM and many other companies, including Wall Street banks? We’re not in China, but sometimes when I read the comments, I think we’re in an insane asylum lol.
Wolf. Is it perhaps okay to say the level heads that actually do exist in this country would say two wrongs don’t make a right?
Where are our politicians that are true balanced budget (or deficit growth at least in line with GDP growth), open market, easy permitting, tactful regulation, and defenders against monopolistic behavior?
The GOP had a few promising folks rising up in the 2010s, but they got run over by the Trump freight train.
And if companies don’t want the government as a shareholder, they can refuse to take taxpayer cash. Just say no. Taxpayers would love that.
Intel lobbied for the CHIPS act and the Secure Enclave program. It’s not like Intel was forced to accept $23 billion from taxpayers, lol
Allow me to clarify. It was bullshit under the CHIPS act, and it’s bullshit now. If intel cannot compete, thy need to die already.
It’s not Intel’s job to keep the gov’t from becoming socialist.
It’s the politicians’ jobs.
That’s true. FORD did not accept Obama’s bailout and that’s when I started buying Ford.
You’re a fool. Good riddance.
Who is?
Wolf, I’m guessing I’m one of your younger readers and commenters so I usually keep my mouth shut. But THANK YOU for pushing back on this nonsense. I’m tired of socialism for wall street and austerity for the rest of us. I’m too jaded to believe it’ll make a difference, but keep on screaming from the rooftops for us.
Wrong then, wrong now. What defines “too big to fail” or “too important to fail”?
I wonder how company behaviors would change if every single company getting free money including incentives given to consumers to buy products (like cars) had to convert that money into USG ownership. Would they ask for less or ask for more?
I think they should make INTC follow the Strategy (formerly MicroStrategy) approach but instead of issuing debt to buy BTC they should issue debt to buy Trump coins…only seems fair. 😁
People don’t judge someone’s actions in a vacuum. They look at things through the lense of your reputation. Compare Obama’s reputation vs Trumps and I think you will get it.
…so half the country thinks Obama/Biden have a “good reputation” and the other half thinks Trump is making good business decisions. Not sure where that gets us…but the respective echo chambers are having good time.
Only one is suing companies while president, we don’t have to both sides this
You lost objectivity because Trump has initiated some defamation lawsuits? What exactly are you referring to? Are you also upset by the current 1000+ lawsuits against him?
we don’t have to both sides this.
we also don’t have to “what about” this.
But it’s all you got, so here we are.
❤️!
Trump is either a devious reformer or a closet socialist. Either way the result is the same.
Capitalism has run rampant and the time to control it is fast running out. The only way to rein it in is by having govt take shares in companies that receive govt “subsidies ”
Maybe at the very least. The companies will endeavour to produce actual physical results and products as opposed to being engaged in financial engineering.
The irony is that the US govt has effectively destroyed its moral high ground when confronting China. But that’s an argument for another day.
History has shown, over and over, that when the government takes an onwnership/stockholder stake, quality drops. If intel cannot complete, they need to die and have their assets sold off. That’s how capitalism works.
WB…I agree. I don’t favor Trump’s move here with INTC at all.
That said, I was also intellectually consistent in holding a jaundiced view on the sizable subsidies that went to EV and allied green industries.
INTC has been mismanaged for a long time. Let them dig their own way out that hole.
It’s not as though there weren’t backdoor financial/political deals behind gov’t subsidies in these other industries that kept them afloat.
Not sure where the national security argument falls into all of this.
I can also find fault in Obama’s stakes in the automakers, and if you are referring to Intel as a welfare queen do you also fault Lockheed and Boeing for the massive amount of government support they receive? Should we take stakes in them now as well as the rest of the defense contractors and the ones that don’t provide a stake we can threaten to put them out of business?? A little sensitive on this topic Wolf..
Gerard
Yes, ALL companies that accept government grants should dilute their shareholders by giving the government shares in exchange for the cash. If companies don’t like that, they don’t have to accept the cash. No company should get free cash, or even low-interest-rate loans for nothing. That’s just a scandal.
Don’t compare a free cash gift to payments for fighter jets, missiles, and rockets. That comparison is just more nonsense.
Break them up. No money for waste, frauds and abuse.
“ The Trump administration is “thinking” about taking an equity stake in defense and munitions companies, according to Commerce Secretary Howard Lutnick.”
+10
At the heart of the ruling elite’s power is a politically untouchable elitist institution which controls the central institution: money.
This goes back to Alexander Hamilton in 1791.
First Bank of the United States, was a national bank, chartered for a term of twenty years, by the United States Congress on February 25, 1791. It followed the Bank of North America, the nation’s first de facto central bank.
It’s Intel, who cares?
Nobody should care.
They make zero AI stuff. They are irrelevant.
They were left in the dust.
If I recall, Henry Paulson (Treasury Secretary under President Bush) kneeled before House Speaker Pelosi and begged for bailout package and asked for her party support. Obama gets all blame for auto bailout when it started during the last days of Bush presidency. We need to stop blaming each other sides and decide what is good for our country. we are competing against China which doesn’t play fair game. Chinese government goes above and beyond in Chinese interest and they have 20-30 year strategy and we focus on 4 years of presidency and blame each other. We have to decide what is good for our country and how we make ourselves less reliable on other countries when it comes to national security (food, energy, technology, etc.). Globalization is hitting us hard and we are up against countries who are taking our advantage.
Unfortunately we hate each other so much and country is so evenly divided, we cannot start discussing an argument before blaming opposite side. I hope we get to a point where we look at American interest first and doesnt matter which party is in White House.
Bingo- Funny how cash for even more union votes happened with the 2008-09 Obama bailout or Solyndra or name the government sponsored quasi private company scam. I don’t like what Trump is doing and I don’t like has been done in the past that is just like this, sometimes even worse depending. FDR started us down this path on a constant and large scale and we need to find a way to back ourselves out of this mindset.
@Gerard,
Intel had a choice, and they could of declined the offer. In China or likely even France, they couldn’t have.
I agree with the argument that taking some ownership in a company is better than welfare. However, most conservatives that I know would rather keep government out of private industry and treat government as the primary contractor and private industry as sub-contractors. Private industry gets paid by the government for work performed. They don’t get acquired by government. They consider that Nationalization of the free market when taken to the extreme. Only commies Nationalize private free market companies. :-)
Now that Trump owns 10% of Intel, I’m sure he won’t exert pressure to micromanage Intel. /sarc
Neither Trump nor the government now own 10% of Intel. The shares will be handed out as the cash is paid to Intel, which has to pass certain benchmarks for each slice. The first slice of $1.1 billion got paid in December. Another $1.1 billion slice was paid this year. So right now, Intel would issue the government $2.2 million in shares. As future payments are made, so would be the share issuance. Trump may be out of office before Intel issues the last batch of shares.
Great point made, thank you.
Point taken. But both actions were and are wrong.
cb,
I think your perspective is along the lines of the traditional free marketeer (semi-absolutist division).
And that’s fine – for a long (long) time I was pretty much in that camp.
But.
1) The world is a much more complicated place than made out in Econ 101 (although, in fairness, Econ 101 tends to say that *a fair number of predicates have to hold for* free market absolutism to be the best course beyond question and
2) It helps to step through the actual individual facts and circumstances of any given situation (admittedly a ton more work than simple ideological assumptions) before taking any (semi) absolutist position.
Here I think that Wolf’s position is pretty sound.
1) Last month the USG was giving away billions in subsidies for fairly little financial return (ntl security – maybe – if the subsidies actually work as promised)
2) Post-Trump – the USG has secured an explicit *financial* return in exchange for the billions (assuming the “investment” actually works).
Simplified Econ 101 would say that the subsidies are likely to be mis-spent – yielding nothing or vast numbers of obsolete, unnecessary chips.
That quite possibly might happen (see Bridges to Nowhere, Shovel-Ready, Cash-for-Clunkers, and the Long Night of ZIRP)
But that was a danger pre-Trump – all Trump did was mitigate the financial risk somewhat.
And, as for the more absolutist position – zero subsidies for anybody – that might be the right call – but witnessing China’s historically unprecedented, meteoric rise over just 20 years or so – and Econ 101’s absolute failure to predict the US’ stagnantion/decline during the same period…it becomes a lot harder to have absolute faith in the absolutist position.
@ cas127
Fair enough.
Ironically, much of China’s meteoric rise is due to US actions (starting with Nixon?). It has enriched China and the Financial Engineering class at the long term expense of the American working and middle class, and at the expense of National security and sovereignty.
Wage arbitrage and outsourcing has a price.
Everyone should remember that it was Clinton who pushed and signed the US -China Relations Act into law. This allowed China to enter the WTO and created their meteoric rise.
Idontneedmuch,
I think history will marvel at how the US et al allowed China to apparently game the hell out of the WTO rules (free market access to the West while China was allowed to manipulate the crap out of its domestic market, so as to create enormous, long-lasting trade surpluses in favor of China).
My guess is that the Powers-That-Be (rapidly becoming Powers-That-Were) in the US, basically – and lastingly – bought into the absolutist position that “Let China send us real assets – exports – while we send them pieces of paper – printed USD” and cackled to themselves self-satisfyingly for 20 years.
How this wasn’t going to end poorly for the US went unaddressed, since certain Powers were too busy counting their gains from the skimmed China price.
(But remember this is a country with a Political Governing class unwilling to address the Entitlements apocalypse for decades too)
Trumpism/protectionisn is the inevitable (and hazardous) blowback.
If at any point from 2002 to 2016 the DC-NYC nexus had been willing to course correct even a little bit (when confronted with empirical reality), the Establishment would still be the Establishment.
cas127…..partially true.
There is another component to this trade dynamic, however. Trade with China in the last 50 years or so has been anything but an analogue for the Smithian or any other abstract “fair trade” model. China has exercised all sorts of perceived “unfair” practices, to include: domestic subsidies, barriers to entry, currency devaluation, capital flow controls, dumping, wage control, “disappearance” of politically non-compliant CEOs, statistics manipulation, etc.
The majority of Intel chips are used in personal computing devices like desktops and laptops, and in servers and data centers. Intel lost the AI race, and in a half dozen yrs laptops will be obsolete. Intel is on the wrong side of the curve and so are our $Billions…unless the government bails before it goes out of biz. This ain’t your father’s Chrysler government bailouts of 1980 and 2008-2009. And those were loan guarantees!
I see this as a bailout. Intel must be in FAR worse shape than management is telling investors. Big surprise there, right??? They’re still competitive in PC/server x86 chips. But as you mentioned that is a declining market. They’ve lost their leadership in chip manufacturing, and they probably will never be competitve there again. Taiwan and korea have the economies of scale that you need to be the low cost producer.
It’s sad that this company needs to become essentially the producer of vital weapons tech that the neocons want to ensure the military can’t be held hostage to foreign producers. Not investable, in my opinion.
“I see this as a bailout.”
BS. Intel does NOT get any new money. It’s the continued CHIPS Act cash, except Intel and its shareholders now have to give taxpayers something in return and existing shareholders are getting diluted. Read the article.
True that !
So much of the media is in the pockets of Corporations ( because of advertising?) , doesn’t matter if left or right .
Government should just let Intel go bankrupt. It lost $18B in 2024 and has missed the boat so many times – mobile chips (went to ARM), new laptop chips (Apple Silicon and others took their lunch), GPUs (Nvidia/AMD), AI (everybody). Intel is Kodak, Xerox, Stellantis, Boeing. Just badly managed.
This is Government Motors 2.0 again.
Yup.
“This is Government Motors 2.0 again.”
That happened in 2022-2024 under the CHIPS act, a Biden deal.
“I’m from the government, and I’m here to help.”
I didn’t like it from Biden. I don’t care for it now. Samsung had a billion dollar Texas factory that sat idle until Tesla signed up for chips (but probably a severe discount).
If the military were to say – “we only buy US built chips” that would spur local factories I’m sure.
This is more government waste. The new Intel CEO said he no longer wants to just build factories and hope there is demand. That’s how Intel lost $18B last year.
Do you know what crashes more than a Boeing plane? An Intel CPU :)
I could be wrong. But I believe while the money was allocated under the CHIPS act, President Trump has the ability to NOT spend a penny of it. See Wolfspeed for a place NOT receiving the ‘Biden’ money.
I think this is ‘new’ money for INTEL as it would have been new money for Wolfspeed, had it been released. The terms are better as you state. I don’t think those terms could have been negotiated if they already had the money…
Companies have to hit benchmarks in building and equipping chip plants in the US. They get paid a slice when they hit a benchmark. If a company like Wolfspeed, which filed for bankruptcy in June, abandons the project, it doesn’t get paid. The Biden administration wasn’t stupid about that when it set it up.
Trump could have tried to get Congress to undo the CHIPS Act. But Trump and Biden agree that bringing chip manufacturing to the US is crucial. So how do you do that? Trump just rebranded the CHIPS Act but kept it going, and is now trying to extract equity stakes for the money provided under the CHIPS Act.
I agree with you, Wolf. This has happened before with GM.
However, GM had a defined path to become wholly owned again. The conservatives called this government overreach and a government bailout. They were encouraged to remove themselves from government ownership. GM accomplished this.
I don’t think Intel is in this position. I could be wrong. The new conservatives are pushing this “bailout”/nationalization. The world has turned upside down.
How about taking a piece or the pie from Tesla, Big Pharma, The Oil Companies. We give them billions every year. I mean if we are going to go down the socialistic road, lets be all in.
Now the Executive branch is taking power that the Founders feared would happen. Without checks, the imbalance threatens the system- whether from them”left” or the “right.” Defending the Constitution is a sworn oath taken by the President, Congress and the military.
Don’t forget “We the people” part!
Left in the dust unless we assert.
Intel was going to get their unallocated CHIPS and Secure Enclave cash, even if they had not issued new stock to the government. How does Intel benefit from this? Meanwhile, existing Intel shareholders had their equity diluted by roughly 10%. Can someone explain how Intel benefits by diluting it’s stock in exchange for (pardon my ignorance) zero additional cash with which to secure new plants and equipment?
Intel benefits because Trump probably told them it was 10% US ownership or he would torpedo (directly or indirectly) the undistributed CHIPS funds.
Jon from the excellent YouTube channel Asianometry advocated for an interesting idea to save Intel in a video he posted yesterday… if the government is going to force things on these companies (e.g., a stake in Intel, an export tax on Nvidia) then pressure Nvidia to allow Intel to second-source Nvidia GPUs, the same way AMD second-sourced Intel chips back in the 1980s and 90s. Given the backlog of Nvidia products, this is actually not a bad idea that’s I think is worth looking into.
Trump can blame himself for the coverage.
He has a private Crypto Currency ripe for abuse, he’s settling frivolous lawsuits from media companies, and he’s got CEOs dropping gold bars off as gifts. He reaps what he sows for not caring about the “appearance of impropriety” in his various actions.
Tweeting that the Intel CEO must resign a few weeks back doesn’t help either!
If the prior president did it it’s a good thing, and if the current president does it it’s a bad thing, even if the two things are the same thing.
/s
Seems more like an observation than sarcasm
Subsidizing a has-been!!!???…don’t we do that all the time??? Note our 46th…a has-beeen politician elected to the US Presidency…PJS
Weak. Try again
The downside of taking a stake in a private business is that you incentivize the government to do business with that private business instead of its competitors. Regardless of the merits of products and prices. It would have been better for Trump to convert the hand outs to low interest loans with deferred payments, while making the government the most senior creditor in the event of bankruptcy. But that doesn’t make as good a headline.
To keep the government out of Corporate America, Trump should have canceled all CHIPS act payments and loans, everything.
But manufacturing chips in the US is crucial. Biden and Trump agreed on that. So how do you get chipmakers to invest in production facilities in the US when they each cost tens of billions of dollars, and when other countries subsidize such investments? Just give them the cash? Loan them nearly free money? Or extract something in return (a stake in the company) for the cash so that the taxpayer doesn’t get totally screwed?
Why not tariff chips like 1000%?
1000% is a little exaggerated, but you’re on the right track lol
Just one idea…
How about putting it out to multi source bid with three $50B loan contracts awarded in which the US govt either is repaid on time or if not paid, takes an equity stake in or possesion of the newly formed entities. Terms would include additional stipulations to the contracts that protect American’s security interests and require chip production in a minimum of time.
Actual numbers and details could be written under the guidance of SUCCESSFUL industry leaders. Then perhaps we would be encouraging Nvidia, AMD, and other titans of business who proven they can create innovate products to participate. Its hard to imagine that none would want to basically have a startup funded by the government.
Could the very best chips in the world across the board be made on US soil in three years if liquidity or immediate return on investment wasnt an issue?
Instead leadership, whatever side of the trough they fill, picked a struggling if not failing partner. The deal improved for the US but its still a sh$t deal for taxpayers and should never have been tolerated.
Grant money can be made available to any company able to apply for it by meeting set conditions. Taking a stake is selecting a specific company to socialize, and the government isn’t historically very good at selecting winners and losers. During wartime the government can seize the means of production of certain critical items in the name of defense, security, etc. But drawing the line of what constitutes defense and security outside of wartime is something that needs to be hashed out by congress.
The CIA has long had a VC operation, IQT, which has invested for decades in startups, over 800 by now, in exchange for shares, just like any other VC. Recent portfolio companies include Gitlab, RocketLab, and Databricks. Two decades ago it helped fund a mapping company that Google eventually bought and turned into Google Maps. IQT makes money by selling the shares of the winners, while its investments in the many losers get wiped out, as any VC.
There should be no grant money to companies. If a company wants cash from the government, it needs to give up a stake. IQT has shown how that model works, and it works well. That’s how it should be with all government grants handed to companies. I’m so sick and tired of these demands for free money by those corporate welfare queens.
“There should be no grant money to companies.”
Maybe you mean specifically private, for profit, companies? We need a mechanism, one less fraught with ethical issues than equity for cash, I’m not sure what exactly it is.
The CIA has long had a VC operation, IQT, which has invested for decades in startups, over 800 by now, in exchange for shares, just like any other VC. Recent portfolio companies include Gitlab, RocketLab, and Databricks. Two decades ago it helped fund a mapping company that Google eventually bought and turned into Google Maps. IQT makes money by selling the shares of the winners, while its investments in the many losers get wiped out, as any VC.
There should be no grant money to companies. If a company wants cash from the government, it needs to give up a stake. IQT has shown how that model works, and it works well. That’s how it should be with all government grants handed to companies. I’m so sick and tired of these demands for free money by those corporate welfare queens.
The U.S. Constitution doesn’t give the federal government the ability to own shares in a corporation.
Its been a bit since I read the constitution but does it give the government authority to give away tax dollars to private companies?
It doesn’t give it the power to do 80% of what it does. We lost that fight in the 1930s
Exactly, those powers and Rights not given to the U.S. Government are entitled to the State government and the people. Where is the explicit provision for excluding the U.S. Government in Intel? The silence may be deafening.
Great Outdoors
Our constitution is one of the vaguest in the world. Basically can be argued, changed or challenged and just depends on the way the wind is blowing and who is in the WH and who has the most in SCOTUS. Much the fault of Congress too who can actually pass laws to cement in current interpretation.
“Our constitution is one of the vaguest in the world”
Not really.
The “New Deal” era and subsequent liberal Courts may have pretended that, but it really isn’t particularly true.
But power once granted to governments/politicians is rarely handed back to citizens willingly or speedily.
Now the Executive branch is taking power that the Founders feared would happen. Without checks, the imbalance threatens the system- whether from them”left” or the “right.” Defending the Constitution is a sworn oath taken by the President, Congress and the military.
Don’t forget “We the people” part!
Left in the dust unless we assert.
The UK doesn’t have a written constitution, all is by precedent.
Ironically, the concentration of power in the president more closely resembles that of the monarch in Britain of 1776 than it does the Britain of today. No one in the UK can scatter pardons like confetti.
The Br Commonwealth countries are not the only ones with Constitutional Monarchies. So do Sweden, Denmark, Holland, etc,
all places of remarkable calm.
How long until Intel announces a $11.1B share buy back…
The CHIPS act felt like national defence spending. I’m not worried about the ROI of a Reaper drone but I know we’re(Americans) all better off(probably) for it. And Uncle Sam and Co already benefit from companies succeeding… they call it a tax.
This is just seems like extra steps that grant the government even more control over the operation. This brings to mind the Nippon Steel and US Steel deal, both Biden and Taco said wouldn’t go through but oh look now Uncle Sam has board seats?
But we’ve decided a company or business is too big or important to fail and they can’t keep themselves afloat, then we need to nationalize it OR move it to private hands that can. Don’t privatize the profits if the public holds the risk.
” but I know we’re(Americans) all better off(probably) for it”
Hmm.
I’m not sure that the $900 billion defense budget of 2025 is assuredly making us 3 times safer than the $300 billion defense budget of 2000.
The US military had 1000 times the material resources of our enemies in Iraq and Afganistan…and had to fight the Iraq War twice and lost in Afghanistan (with the historical experience of losing in Vietnam and not winning in Korea).
If your car is on fire, the problem isn’t a lack of gasoline.
Of all Americans past or present, Eisenhower probably had the most deep and far ranging understanding of the US military and national defense – and he had more than a bit of a jaded eye for both.
I’m sure we are not 3x safer. Especially when 40% of chips in our weapons systems use parts sourced from China.
A few companies are 3x richer for sure.
Lori Logan: “So, I believe bringing reserves down gradually, while also making our ceiling tools available and encouraging market participants to use them when they are economically attractive, will be an effective strategy in the United States.”
Logan’s right. Drain reserves while lowering policy rates. The 1966 Interest Rate Adjustment Act is prima facie evidence.
Just how would that accomplish anything of relevance or significance?
Nothing says capitalism like a bunch of bureaucrats at the fed telling us what all the prices should be and another bunch of bureaucrats in the government taking our money and investing it for us. What happened to that strategic crypto reserve thing anyway? We need that too. A government hedge fund that buys Fartcoin and Intel shares with my money. This is exactly what the founders had in mind btw.
@Anon
You mean like WIN, Whip Inflation Now?
I agree that if you supported the billions of dollars in cash grants, it’s hard to oppose getting something in return. But for the vast majority of people who would oppose these grants in the first place, it’s fair to also oppose the government taking a sizable ownership position in a private company.
Yes, giving taxpayer money to pick winners is terrible business. Getting something for the money is a tick better.
I agree with Wolf. At least Trump is trying to give the US taxpayer a chance at recouping some of its investment. I have no idea if America’s chip industry would be better severed by forcing Intel to spinoff it’s foundries. I am certainly hopeful that Intel can rally. I get the feeling that the last CEO did a very poor job getting Intel’s latest chip designs to market in a timely fashion, specifically their 18A & 14A designs.
I agree too. Rather than give Ukraine weapons that cost American tax payers, Trump sells them to NATO. Yes, we pay for part of that out of our NATO dollars but at least we are not footing the whole bill. Trump is doing the same thing with Intel, no more free money. It would be nice to see every president, senator and congressman be fiscally responsible.
There are no NATO dollars. Thats not how it works. He doesn’t sell it to NATO. NATO isn’t buying. Countries like Germany are paying for it. If he even allows the export.
Its just quit pro quo – Russia helped Trump, Trump helps Russia.
Howdy Youngins. Remember when Ford first refused bailout $$$ back during the financial crisis??. They even had a commercial or two about being one of the big 3 that did not take $$$. It was short lived and Ford took or was forced to take the $$$$ like most business whores would…..
False. Ford did not participate in taking any government funding.
Aug 29, 2012 · Ford Motor owes the government $5.9 billion it borrowed in June 2009, the same month GM filed for bankruptcy. By Sept. 15, Ford needs to start paying that money back.
Jun 23, 2023 · On the same day The Hill reported that Ford will be kicking off another round of layoffs, CNN reported that the company agreed to a massive $9.2 billion government loan.
No, Ford did not borrow funds directly from the Troubled Asset Relief Program (TARP) during the 2008 financial crisis, but it did receive a $5.9 billion government loan from the Department of Energy (DOE) in 2009 to finance automotive projects for higher mileage vehicles. While General Motors and Chrysler accepted TARP-funded bailouts, Ford chose a different path, securing private financing before the crisis and then using the DOE loan, which was a separate government program with different conditions.
Was that actually true?
I don’t recall Ford getting any G money (a la GM at least).
Maybe I am mis-remembering or missed some giveaway somewhere.
Ford never borrow any TARP (Troubled Asset Relief Program) funds but subsequently participated in a $5.9 billion loan for higher mileage vehicles set up by the US government.
And TARP loans were were astronomically larger than $6 billion right?
I recall this being your comment:
“False. Ford did not participate in taking any government funding.”
“…using the DOE loan, which was a separate government program with different conditions.”
I’m pretty sure the Dept of Energy is US Gov’t….
Alan Mulally is an engineer. He was at Boeing leading the design team for the cockpit of the 757/767 project. It was the first all-digital control deck of a commercial aircraft. He was also the director of engineering on the 777 program.
Mulally took a job at Ford on 5 September 2006. Two jobs really; President and CEO. Imagine that, a CEO of a manufacturing company that’s an engineer.
On 20 August, Wolf’s reply back to my comments underscores the fact that Ford has a leadership problem with the current CEO and the two CEO’s prior to Mr. Farley. I reckon so.
https://wolfstreet.com/2025/08/15/my-thoughts-about-those-july-retail-sales/#comment-649963
One of Mulally’s fist tasks was to mortgage all of Ford’s assets, including the iconic Ford logo, and raise $23.6 billion to rebuild Ford’s operations and to have capital, if needed, for an unexpected turn of events. This was in fall 2006.
That’s why Ford did not need, or take the GFC bailout money that GM and Chrysler did.
S C B D is spot-on in his comments regarding this.
The Republican Party used to believe in less Government intervention and more free market activity. Taking a financial stake in a corporation smacks of Socialism. Maybe this is just Trump, but the Republicans’ tacit acceptance of this deal speaks volumes.
The libertarian at my office, who makes that his whole personality, was vehemently in favor for tariffs…
Like what is happening…
Vice President Dick Chany saved the private company he was on the board of prior to his election. Congress passed a huge military deficit bill to finance the Iraq undeclared war in the early 2000’s. Gee, that less government is good government has left the hen house decades ago
Then he shot a guy in the woods that one time. Back when the GOP had a sense of humour.
@Alex In my lifetime the Republican Party has been lying saying that they believe in less government intervention while it has increased overall (like taxes and the deficit) under “both” Republican and Democrat leadership in Congress and the White House. I’m happy so see that more people are joining me in realizing that 99% of politicians (on both team red and team blue) just trying to get rich and make their campaign donors rich. We are close to 25% “No Party Preference” in CA and I would love to see it pass 50% before I die (and maybe see things start to get better in my state).
Arizona has 34% independent voters and increasing as well. I would love to see an Independent Governor again in any state.
Alex…. it’s fascism, not socialism.
I’m too old to be a cheerleader, but I think Wolf is 100% right on this.
It’s hysterical that corporate grants are somehow OK but expecting something tangible in return other than promises is not. And no, this isn’t two wrongs make a right….it’s trying to improve a bad deal for taxpayers. I believe this was tied to the $8.9 billion not yet awarded, so I bet Intel could have told the feds to pound sand if they wanted.
I assume everyone complaining knows that the PRC owns a huge fraction if not the majority of companies in that country, and both the French and British governments have stakes in Airbus? Ahem…..free trade, right?
When does the Federal Government make the best “deal”? It’s the art of the deal that has pervaded many people’s mind for a decade or more. Blame that on media and political hype.
@northernlights living on the SF Peninsula I am surrounded by (otherwise well-educated nice people) that hate Trump so much they just reflexively disagree with everything he says. I’m no fan of Trump (or government bailouts), but I’m not going to get upset if he gets some stock in return for bailout money (or tries to deport a wife beating gang member that is here illegally)…
You should contact an attorney gerneral on the other coast, they have been quite desperate to find any evidence that he’s a gang member.
Arbitrary justice can just as quickly target yourself. Or your business.
It looks like DJT is trying to be French. This is a favorite practice of the French government. They own minority shares in a bunch of giant businesses, for example: Engie (GDF Suez), Air France‑KLM, Orange mobile, Renault, Safran, Thales, STMicroelectronics, Stellantis, etc.
This cash was Biden’s free gift to Intel, and Trump clawed the free gift back and made it an exchange of cash for shares, and shareholders got diluted. That’s all this is.
You should have complained about the CHIPS Act cash when it was signed into law by Biden. I did complain about it, for example, in my linked article.
All you want is free taxpayer cash to enrich shareholders??? And nothing in return? That was the CHIPS Act under Biden.
Then there is the IRA and Green New Deal[aka same as the Old Deal]. People have short memories and some seriously diminished expectations when it comes to “their” party.
Me, I just expect higher interest rates at some point. But maybe QE will be back.
Wolf the historic principle of U.S. Government is ” to promote the general welfare of the people”. It is noted countless times even before the Constitution was passed. If you believe that acquiring private interest in a private business with no outlook for the general welfare that’s a opinion.
The prior U.S. acquisition of private assets had a withdrawal time or clause. If the U.S. wants to sell the 9.9% that will effect the current shareholders and be a political point not based on the economy, or U.S. protection. The prior bailouts and subsidized government dollars to private enterprise palls in comparison.
They are going to do whatever they want to do and not a damn thing anyone of you can do to stop them….its not even an original script, it’s a rerun by same old actors….fake and phoney con men, grifters and men of NO character…what an empire that promotes grift over work, lies over the truth, your fake reality with all paid actors globally…
This cash was Biden’s free gift to Intel, and Trump clawed the free gift back and made it an exchange of cash for shares, and shareholders got diluted. That’s all this is.
You should have complained about the CHIPS Act cash when it was signed into law by Biden. I did complain about it, for example, in my linked article.
All you want is free taxpayer cash to enrich shareholders??? And nothing in return? That was the CHIPS Act under Biden.
TDS is rampant on Wolf’s website. They must be paid to spread the hate.
Any repeat reader knows exactly how Wolf feels about the issues.
Now the government is tied to Intel, and has a vested interest in it succeeding. If Intel continues to fail, do you think the current administration will be willing to walk away with $0 to show for it? No, they will continue to throw taxpayer money at it in an attempt to prop up a bad business, in order to “not lose taxpayer investment”. The government is now incentivized to prevent a better business from popping up, as they don’t want to see their 10% Intel shares go to $0.
Now, do I think government ownership of companies is a bad thing? Not necessarily, I just recognize that this move isn’t all sunshine and butterflies.
Perhaps we should retro-actively take shares in SpaceX, Tesla, oil companies, and farms for the billions in taxpayer funds we give those industries as well.
“the current administration will be willing to walk away with $0 to show for it?”
The last administration already walked away from it. That money was a free gift. And with the 10% stake, the current administration clawed back the free gift and turned it into an exchange of cash for shares, which they can sell in the future.
Don’t compare a free cash gift to payments for fighter jets, missiles, and rockets. That comparison is just nonsense.
But any company that gets a cash grant, such as Intel, should dilute their shareholders by giving the government shares in exchange for the cash. If companies don’t like that, they don’t have to accept the cash. No company should get free cash, or even low-interest-rate loans for nothing. That’s just a scandal.
All right class, repeat after me………………….
any company that gets a cash grant, such as Intel, should dilute their shareholders by giving the government shares in exchange for the cash. If companies don’t like that, they don’t have to accept the cash. No company should get free cash, or even low-interest-rate loans for nothing.
any company that gets a cash grant, such as Intel, should dilute their shareholders by giving the government shares in exchange for the cash. If companies don’t like that, they don’t have to accept the cash. No company should get free cash, or even low-interest-rate loans for nothing.
any company that gets a cash grant, such as Intel, should dilute their shareholders by giving the government shares in exchange for the cash. If companies don’t like that, they don’t have to accept the cash. No company should get free cash, or even low-interest-rate loans for nothing.
I’m against our government granting or getting a piece of company under our system. Not against public ownership by any means but this is really not control or ownership in any real sense but free money essentially to offset bad US policy for a half a century. Besides that I was at Intel from 1990-2002 when it was relevant but feels like buying into a Florida condo tower right now. If we really believe certain things are critical then nationalize them. Certainly no issue if that happened with insurance, health care or energy and mining sectors. That said, our government has no experience doing anything like that so only reason not to. If it’s important to our country then taxpayers can own it collectively.
“Companies doing share buybacks or having ever done share buybacks should never receive any subsidies at all period. They should be automatically excluded. Their shareholders can cough up that money. Not taxpayers.”
– Wolf Richter, Mar 20, 2024
Wouldn’t you have been more supportive of the complete removal of these grants, instead of using it to buy a stake in Intel? A bit over a year ago, you were explicit in that Intel should “never receive any subsidies at all period”, but this is still a subsidy.
The issue here was the media (and people here) bitching about the 10% stake, and not bitching about the free cash gift under Biden. That’s what the article is about.
I said my piece about the CHIPS Act back then. That’s old news.
“If Intel fails, and its shares go to zero, taxpayers will be no worse off than under the Biden deal. But if it thrives and the shares retain their value or gain value, taxpayers are far better off.”
Huh – did I miss something?? (Sometimes I do fall asleep in class when it’s boring).
How will taxpayers (you and me) be better off?
Will I/we get a dividend check? Answer – no!
Well, it will be more money to send to you – crane.
Your right. You fell asleep. Go back and reread the article. Take notes, There will be a quiz.
Does this move create a conflict of interest regarding any sort of regulatory actions or laws involving the microchip industry?
This cash was Biden’s free gift to Intel, and Trump clawed the free gift back and made it an exchange of cash for shares, and shareholders got diluted. That’s all this is.
Biden’s free cash came with stipulations: it had to be invested in building chip manufacturing plants in the US, and it would be paid out after benchmarks were hit. Those stipulations have not changed. But now taxpayers got a stake in Intel in return for the cash. So any conflict of interest was already part of it from the beginning.
I agree with your argument, Wolf, but the real question is whether or not Intel would have lobbied for CHIPS if they had to give a 10% stake to the government. Same for all other chip companies. I don’t think any strategic company would have signed on to this deal if it was the original proposal.
They all know the deal they’re making with the devil when they make it: if you take the government’s nickel, then you get the government’s noose. “I am altering the deal. Pray I don’t alter it any further.”
Lot of truth to that.
a nation must defend and protect industry critical and vital to the survival of thenation
If this the right way is up for discussion
Giving failing companies money from taxpayers was awful.
Taking stakes in companies at part of a sovereign wealth fund while dumping and pumping the stock is also awful.
To make it even more awful let’s adopt this as a broad strategy and take out more debt to invest into a stock market that has many valuations at ridiculously high levels…. What could go wrong?!
Instead how about we loan them money if it’s such a crucial company and collect interest from their possible success and pay off existing debt… Wild I know!
Loans are part of the CHIPS Act, as explained here.
Right but should be all of the CHIPS act
Trump should put a prohibition on Intel stock buybacks to protect the government’s investment.
Agreed. But to their credit, Intel stopped the buybacks in 2021.
Under the CHIPS Act, the government only disburses the money in pieces after the recipient chipmakers hit certain preset benchmarks of constructing chip plants. So they have to build and equip the plants or they don’t get the cash.
Intel so far has received two payments totaling $2.2 billion after having hit some of these benchmarks.
Great article, Wolf.
That explains again why people hate Trump so much. Channelling taxpayer money to corporate has been a tradition long practiced in the US. Trump does not respect tradition and breaks all etiquette.
I don’t get it. A 10% stake does not make Intel now beholden to the gov’t. Anybody who doesn’t think US companies are already beholden the the gov’t hasn’t been reading the news.
People complain about the forgiveness of student loans but then don’t want something in return for money given elsewhere.
Makes the shares non-voting. Define a schedule for selling them. Have conditions for them to be cancelled. But make it a trade, not a gift!
This doesn’t make Trump a good person. Leave the politics out of the evaluation of the policy.
Something isn’t a “gift” if it only comes attached with conditions that the recipient must first fulfill before receiving it.
You may think the US got a raw deal under the CHIPS Act and paid too much for Intel to build facilities in the US, which is your prerogative. But that wasn’t “free money”: Intel had to eat the higher cost of building plants in the US in order to receive it.
Plus, it’s not like this move doesn’t have repercussions. Intel’s market value didn’t instantaneously change, so the $10B in government shares dilutes the value of all of Intel’s shareholders.
It’s effectively taking $10 billion away from shareholders to give to the government.
“It’s effectively taking $10 billion away from shareholders to give to the government.”
🤣💔
Intel shareholders get $11 billion in cash from the government under the CHIPS Act and in return Intel issues $11 billion in new shares to the government that dilute the existing shareholders by the amount of cash they got. It’s an even trade, dude. You people crack me up.
If Microsoft invests $11 billion in an AI miracle company, it gets $11 billion in shares from that company. And it dilutes existing shareholders of the AI company by those shares, but the AI company whose shares they hold got $11 billion in cash and is therefore worth $11 billion more. That’s how it’s done. Basic investment math.
What was different under the CHIPS Act is that these companies got this money as free gift from the government. And all Trump did with Intel was make a standard commercial transaction out of it, shares in exchange for cash.
You’re right, my mistake. It isn’t an $11B dilution, but it IS a ~$1.9B dilution.
The government bought 433.3M shares at $20.47/share (~$8.9B) in trade for the future $8.9B in investments. But that share price was below the Aug 22 price of ~$24.90/share.
So they are giving up $10.8B in shares at market value, for $8.9B in investments. A dilution of $1.9B.
And they are tied to giving up another 5% of shares for $20/share if they don’t have at least 51% of the foundry business. So if they don’t perform well, there goes billions more of shareholder value.
Just FYI, the government isn’t getting $11B in shares, you are confusing that with the total money going to intel, ($8.9B in “investments” and the $2.2B grant they were already given).
No, the investment includes the $2.2 billion that Intel already received. It can receive $8.9 billion in future disbursements if it hits the benchmarks, plus it already received $2.2 billion so far, starting with the first payment last December. $8.9 billion + $2.2 billion = $11.1 billion.
The shares will be issued as Intel receives the cash over time, as it hits the required benchmarks. So this is not all at once, but stretches out over years.
I always appreciate your politically neutral take on things Wolf.
One of the delicious aspects of this affair is watching media object, or pretend to object (by way of scoring “objectivity” points), to the government doing something unmistakably socialistic – directly own the means of production, via a stake in a failing company.
But in the same vein, your stance on this makes one ask: If this “deal” “with” Intel is acceptable, why isn’t it acceptable for the government to demand shares and dividends from all the other corporations it constantly subsidizes and bails out?
Consistency may be the hobgoblin of small minds, but if you’re asking that from media people, we can ask it of you too.
I like the article, something new for me to think about to stop me from over trading. I’m surprised that the passive nature of the investment hasn’t been discussed here, neither in the article nor the comments. The U.S. government will get no board seats in exchange for the investment, just a simple equity stake. I think I would have a problem with that if they did, but since it’s passive, no problem.
100% agree with you Wolf. Why aren’t government grants in the shape of equity injections rather than just gifts? The government doesn’t have to hold those shares indefinitely, its hardly reaching the levels of state capitalism.
I think most of the hype is due to Dems knowing what the GOP would be shouting right now if they were doing the same. They shout socialism and communism at Biden of all people, then take a leaf out of what is typically a more socialist policy.
Trump is talking about defense companies now though, because the US govt is their largest customer. Now that one feels a bit more tricky. But who knows, if our new brand of corporatism has become such that these companies are too big to fail, hell maybe the US should have a stake. But its another stretch further.
Yes, taking a significant share in a company’s stock is different than giving it a grant. It’s not a hard question to answer and I don’t understand the attempt at equivalency here. I don’t want our president summoning the CEO’s of companies into his office to shake them down, and I’m surprised to find avid supporters of this type of behavior here. Oh well.
Guess a stake in TSM is coming soon?
TSMC is supposed to get a free gift of $6.6 Billion under the CHIPS Act plus $5 billion in loans.
So that $6.6 billion in free gift could be converted into a 0.66% stake in the $1 trillion company. So not much dilution. Go for it! But I doubt it will happen. I haven’t seen any signs yet.
The only issue I have with government ownership stake in companies is that governments change. Under Trump, government wants these companies to succeed at production. Under a future Newsome government (if such a thing could happen), the government may want something different.
With that said, some sort of national industrial policy is probably required if the US is to successfully bring production back home.
Corporations are artificial persons. They currently have legal entity status to the degree that legally they are human beings. It’s possible to reframe that so that they are judged as legal persons but not human beings and thus do not have inalienable rights endowed by God. Instead they have rights endowed by their creator – the state. And those rights can be limited.
CEO’s of large corporations are employees, they are not owners. They are “professional” managers who in fact are most skilled at pursuing their own interests and using their special place in proximity to corporate assets to enrich themselves.
Someone who founds a company, puts his own capital and labor at risk is an owner. I want owners protected.
Most large corporations are not owned. When shares are counted in the millions and distributed across millions of human hands, that corporation has no owner. CEO’s are not owners unless they were founders. Steve Jobs was an owner. Tim Cook is not.
Intel was once owned, it no longer is. As long as the government is intent on pushing Intel to succeed in product and production, then more power to Trump.
Clearly there are dangers. But we have been in danger for decades while American production moved overseas and ownership of the economy by human beings evaporated
The CIA has long had a VC operation, IQT, which has invested for decades in startups, over 800 by now, in exchange for shares, just like any other VC. Recent portfolio companies include Gitlab, RocketLab, and Databricks. Two decades ago it helped fund a mapping company that Google eventually bought and turned into Google Maps. IQT makes money by selling the shares of the winners, while its investments in the many losers get wiped out, as any VC.
There should be no grant money to companies. If a company wants cash from the government, it needs to give up a stake. IQT has shown how that model works, and it works well. That’s how it should be with all government grants handed to companies. I’m so sick and tired of these demands for free money by those corporate welfare queens.
This is utter nonsense.
Just tax the companies. Is that so hard? taking a stake is an idiot’s idea of a ‘clever move’. If the company is successful we get more tax dollars, if it isn’t our investment goes to zero in that company but hopefully the investment in the infrastructure and competition still benefit the country.
This has to be the stupidest thing I’ve ever heard.
Oh but right ‘taxes’ are bad. but tariffs are good. living in the upside down. You know being a ‘maverick’ is starting to look an awful lot like having dementia.
They’re converting a free cash gift to an equity stake. That’s all they’re doing. Why is that sooooo hard to understand????
I wonder how stock markets have performed historically in communist countries, better, worse, or similar to more free market countries? It seems the US could be slipping in that direction which could put our idolized high returns at risk, besides high valuations. America might want to get its act together with debt and deficit spending if it wants to keep people investing in the stock market it holds so dear.
They’re converting a free cash gift to an equity stake. That’s all they’re doing. Why is that sooooo hard to understand????
The comparison you propose is not possible. Actual communist countries don’t have a stock market, which implies private ownership and capital formation. The Shanghai stock exchange opened December 19, 1990, while Vietnam’s opened July 28, 2000. These dates may be viewed as the dates China and Vietnam were no longer communist in anything but name. True to their professed ideology, the USSR never had a stock market and North Korea still doesn’t have one.
This was the most interesting comment section in a while!
I say NO more corporate welfare or bailouts. At least Trump
was trying to claw some of it back and create some accountability.
From 20 December 2024:
“LEHI, Utah and SHERMAN, Texas, Dec. 20, 2024 /PRNewswire/ — Texas Instruments (TI) (Nasdaq: TXN) and the U.S. Department of Commerce today announced an award agreement of up to $1.6 billion in direct funding through the U.S. CHIPS and Science Act, following the preliminary memorandum of terms announced in August 2024. The funding will help support three of TI’s new 300mm wafer fabs currently under construction in Texas and Utah. Support from the CHIPS Act, including the 25% investment tax credit, will help TI provide a geopolitically dependable supply of essential analog and embedded processing semiconductors.”
Oh yeah, Texas Instruments makes chips in Texas. At their Richardson, Texas plant, they make the 16 bit, medical/defense grade DAC8812C chip. I now have four of these chips in my living room.
Schiit Audio makes their newest DAC in San Antonio, Texas. It is called the ‘Gungnir 2’ Here is what Schiit says about the DAC that’s in my main system:
“D/A Conversion IC: Texas Instruments DAC8812C x 4.”
Why do they use 4 separate DAC chips in a stereo digital to analog converter?
“Multiform™: our new approach to multibit DACs, including a new balanced multiplying analog section, as well as our unique time- and frequency-domain optimized DSP digital filter, and unique medical/defense-grade DACs (in this case, four DAC8812CRUZs).”
Of course, I’m streaming ZZ Top’s ‘La Grange’ on the stereo as I write this.
Thank you Texas Instruments and thank you Schiit Audio.
As TI explained it, their chips are in everything in a home that has an electrical cord coming out of it or a battery in it.
I guess they mean, as long as it was manufactured over the past 25 years.
But what exactly is the purpose and benefit of having the gov’t taking some ownership? And will Don Trump personally be giving tips on running the fab operations?