Why Is Trump-Backed Intel Still Not a Buy? The Problem Isn’t Money

TradingKey - With the Trump administration planning to take a 10% stake in Intel and SoftBank investing $2 billion, Intel’s stock has surged about 30% in August, pushing its valuation to the highest since 2002. However, Wall Street analysts argue that while government backing may boost the stock in the short term, Intel’s real long-term problem is not a lack of funding — it’s a lack of customers.

On Tuesday, August 19, as U.S. tech stocks fell — with Nvidia posting its largest single-day drop in four months — Intel’s stock stood out, rising 6.97% to $25.31. Since August, Intel has gained 28%, adding $24 billion in market value to surpass $110 billion.

With its recovery still uncertain, some now argue that Intel looks “expensive.”

According to Bloomberg, the recent rally has pushed Intel’s price-to-earnings ratio — based on expected earnings over the next 12 months — to 53x, the highest since early 2002.

Government Support Without “Real” Capital

White House Press Secretary Karoline Leavitt confirmed media reports on Tuesday, stating that the U.S. government is finalizing an agreement to take a 10% stake in Intel, the chip giant.

For years, the semiconductor leader has not only lost market share in traditional PC chips to AMD and Qualcomm, but also fallen behind AMD and Nvidia in the AI race. The BBC noted that the potential equity swap deal under the Trump administration could help Intel compete with Nvidia, Samsung, and TSMC in the AI chip market.

Deutsche Bank analysts said that the news of a potential U.S. government stake, combined with SoftBank’s investment, shows that Intel CEO Lip-Bu Tan is taking bold steps to strengthen the company’s financial and strategic position during a difficult transformation.

However, the so-called government investment involves exchanging approximately $10 billion in CHIPS Act subsidies for an equivalent equity stake — a “subsidy-for-equity” deal rather than new capital. This approach has drawn criticism.

U.S. Commerce Secretary Howard Lutnick said:

“We should get an equity stake for our money. We'll get equity in return for that... instead of just giving grants away.”

Bernstein analyst Stacy Rasgon pointed out that Intel was supposed to receive these CHIPS Act funds for free, so giving up a 10% stake now seems like a worse deal. If the goal is to help Intel build significant capacity in the U.S., $10.9 billion is simply not enough.

Analysts estimate that building Intel’s next-generation 14A technology could require up to $40 billion.

Intel’s Real Problem

Loop Capital analysts described SoftBank and potential U.S. government support as “a lifeline with no secure anchor at the other end,” noting that while Intel may be finding new equity investors, this doesn’t guarantee it will secure customers for its foundry business.

While Intel’s foundry business has clients like Amazon and Microsoft, its largest customer is Intel itself. In contrast, its rival TSMC counts Nvidia, Apple, and AMD among its clients.

Bernstein’s Rasgon said, “We do not believe that Intel's capability gap has anything to do with money.”

Patrick Moorhead, founder of Moor Insights and Strategy, added that if the U.S. government becomes a long-term customer of Intel, it could actually complicate Intel’s innovation challenges, leading to inefficiency, lack of innovation, and higher costs.

Therefore, Moorhead hopes Intel can stand on its own, rebuild itself into a credible leading foundry, and recommends the government sell its shares.