Trump Says He 'Paid Zero' for the Government's $11 Billion Stake in Intel. Here's the Downside.
This is corporate socialism in a MAGA hat.
President Donald Trump negotiated a deal last week for the U.S. government to take a substantial ownership stake in an American company. Despite his assurances, Trump's socialistic transaction is a terrible deal not only for the parties involved, but for the entire U.S. economy.
"It is my Great Honor to report that the United States of America now fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future," Trump posted Friday on Truth Social. "The United States paid nothing for these Shares, and the Shares are now valued at approximately $11 Billion Dollars. This is a great Deal for America and, also, a great Deal for INTEL. Building leading edge Semiconductors and Chips, which is what INTEL does, is fundamental to the future of our Nation."
"I PAID ZERO FOR INTEL, IT IS WORTH APPROXIMATELY 11 BILLION DOLLARS," Trump added on Monday. "All goes to the USA. Why are 'stupid' people unhappy with that?"
As of this writing, Intel's market cap is around $110 billion, so a 10 percent stake would indeed be worth $11 billion. But despite what Trump says, this was not a freebie.
"Under terms of the agreement, the United States government will make an $8.9 billion investment in Intel common stock," the company announced. "The government's equity stake will be funded by the remaining $5.7 billion in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program….The $8.9 billion investment is in addition to the $2.2 billion in CHIPS grants Intel has received to date, making for a total investment of $11.1 billion."
Intel added that "under the terms of today's announcement, the government agrees to purchase 433.3 million primary shares of Intel common stock at a price of $20.47 per share, equivalent to a 9.9 percent stake in the company." According to the Financial Times, that was "below Friday's closing price of $24.80, but about the level where they traded early in August. Intel's board had approved the deal, which does not need shareholder approval."
The Financial Times added that under the agreement, "the US will also receive a five-year warrant, which allows it to purchase an additional 5 per cent of the group at $20 a share," but only "if Intel jettisons majority ownership of its foundry business, which makes chips for other companies." Trump may be expanding state ownership of private industry, but at least he seems to have no interest in seizing the means of production.
The CHIPS Act grants were approved under Trump's predecessor, President Joe Biden. Before leaving office, Biden's administration rushed to finalize many such grants, even as Intel was the worst-performing tech stock in 2024; the government actually agreed to less than initially allocated when the company failed to hit certain milestones.
Instead of rescinding those grants, as Trump reportedly threatened to do, he instead demanded a tenth of the business, as a result making the U.S. government Intel's largest shareholder.
Every part of this transaction flies in the face of any sincere interpretation of free markets, including the Biden administration's original sin to approve billions of dollars for a struggling company. It is perhaps telling that as Reason's Eric Boehm noted last week, the idea that the U.S. government should take a piece of Intel in exchange for CHIPS Act funding was first floated by Sen. Bernie Sanders (I–Vt.). Trump and his allies are now issuing talking points that could have come from the socialist senator himself.
If the U.S. government insists upon dishing out taxpayer money to private companies, is there any reason it shouldn't, as U.S. Secretary of Commerce Howard Lutnick put it to CNBC, get "a piece of the action"?
There are many reasons, in fact. "The most immediate risk is that Intel's decisions will increasingly be driven by political rather than commercial considerations," Scott Lincicome of the Cato Institute wrote Sunday in The Washington Post. "With the U.S. government as its largest shareholder, Intel will face constant pressure to align corporate decisions with the goals of whatever political party is in power."
Not only that, Lincicome writes, but "Intel's U.S.-based competitors…might find themselves at a disadvantage when vying for government contracts or subsidies, winning trade or tax relief, or complying with federal regulations. Private capital might in turn flow to Intel (and away from innovation leaders in the semiconductor ecosystem) not for economic reasons but because Uncle Sam now has a thumb on the scale."
Such market distortions may seem abstract, but they can have devastating consequences for the American industrial economy. "Will investors and entrepreneurs stay away from critical industries that might also see the U.S. government eager to get more involved?" Lincicome wonders. "Will future presidents, Republican or Democrat, use this noncrisis precedent to carry out their own adventures into corporate ownership with their own economic and social priorities attached?"
Indeed, White House National Economic Council director Kevin Hassett told CNBC on Monday that he's "sure at some point there'll be more transactions, if not in this industry, [then] in other industries."
Trump has made several such deals just since reentering office in January. He leaned on Intel competitors Nvidia and AMD to give 15 percent of proceeds from Chinese sales to the government; he demanded veto power over U.S. Steel as part of its sale to the Japanese company Nippon Steel; and MP Minerals, which operates a rare earth mineral mine in the U.S., got a $400 billion government investment that made the Department of Defense its largest shareholder.
In his Monday morning Truth Social post defending the Intel agreement, Trump said, "I will make deals like that for our Country all day long."
But as Lincicome notes, Republicans likely won't be in power forever; in time, a Democratic president would have the same influence on Intel—and beyond.
"This is a product of both parties forgetting a cardinal rule of politics: don't give yourself powers you don't want your opponents to have," writes Ryan Young, an economist at the Competitive Enterprise Institute. "The Democrats who passed the CHIPS Act likely did not foresee Republicans using it to essentially nationalize Intel. Similarly, Republicans cheering government takeovers of chipmakers will somehow be surprised if Democrats invoke similar powers in the health insurance, energy, and other industries when they are in power again."
