Intel-US Government Agreement: Possible Side Effects

The U.S. government acquired a 9.9% stake in Intel by converting subsidies into common stock. The California-based company filed a mandatory Form 8-K with the Securities and Exchange Commission (SEC), which details the transaction and includes a risk warning.

The government could influence Intel's business

The Department of Commerce invested approximately $8.9 billion in Intel, equivalent to a 9.9% equity stake. In reality, the outlay is zero because the sum corresponds to subsidies already awarded to the Californian company by the previous administration under the CHIPS and Science Act and the Secure Enclave program.

There are no particular risks for the government. In fact, it now occupies an advantageous position because it could influence Intel's business. The document submitted to the SEC highlights that the deal could change based on new laws, regulations, or if a Democratic Party president becomes president.

Intel also warns that the transaction eliminates all contractual rights related to current subsidies and could prevent access to future subsidies. The U.S. government could become the largest shareholder and thus pursue interests different from those of other shareholders or limit potential future transactions.

Intel emphasizes that sales outside the United States accounted for 76% of revenue for the fiscal year ended December 28, 2024. International operations could be negatively impacted by the presence of the government as a significant shareholder. The government could impose additional regulations, obligations, or restrictions, such as prohibiting foreign subsidies.

Finally, given the lack of recent precedent for similar transactions and the government's emergence as a significant shareholder, Intel emphasizes the potential for immediate or long-term negative reactions from investors, employees, customers, suppliers, business partners, foreign governments, or competitors. There could also be litigation related to the transaction and increased public or political scrutiny of the company.

CEO Lip-Bu Tan said Intel doesn't need subsidies. The deal with Intel has been criticized by industry experts and some Democratic politicians. The Governor of California wrote in X that the United States has become the Socialist Republic of America .