Why Is Intel Falling Despite Government Support? The ‘Grant-for-Equity’ Model Backfires

TradingKey - Intel’s stock surged 23% last week on speculation that the Trump administration would take an ownership stake in the once-dominant semiconductor giant. However, investor enthusiasm quickly faded after reports emerged that the U.S. government is considering converting grants from the CHIPS and Science Act into a 10% equity stake in Intel — a move that has raised skepticism and concerns.

On Monday, August 18, Bloomberg, citing unnamed sources, reported that the U.S. government is discussing converting some or all of the CHIPS Act funding into equity, in exchange for a 10% stake in Intel. If true, this would make the U.S. government Intel’s largest shareholder, turning the company into a de facto state-owned enterprise.

Previously, markets had expected that government investment would support Intel’s turnaround strategy and help it regain leadership in the semiconductor industry.

However, analysts point out that converting CHIPS Act funds into equity is largely symbolic. Intel has already been allocated $10.9 billion in subsidies under the Act — nearly equivalent to the ~$10.5 billion it would cost to acquire a 10% stake at current market valuation.

This approach offers little to no incremental capital, making the equity conversion appear insincere and financially hollow. As a result, Intel’s stock plunged over 5% intraday on Monday.

Moreover, Aptus Capital Advisors, which holds over 80,000 shares of Intel, said:

“The fact that the U.S. government is stepping in to save a blue-chip American company likely means that Intel's competitive position was much worse than what anybody feared.”

Direct government intervention in a single corporation is also extremely rare in the U.S. Some analysts suggest this move is more about geopolitical signaling — a “China card” — than industrial policy, raising concerns about the impact on free-market principles and mechanisms.

Still, the report has not been confirmed by the White House or Intel, and the final form of government investment remains uncertain.

In contrast, Japan’s SoftBank Group announced plans to invest $2 billion in Intel, sending the stock up about 5% in after-hours trading on Monday. According to The Wall Street Journal, the market appears to view SoftBank’s move as a vote of confidence — a clear contrast to the skepticism surrounding government involvement.