President Donald Trump’s administration on Friday confirmed a massive $11.1B investment in beleaguered U.S. legacy chipmaker Intel (NASDAQ:INTC), a move that was called a “terrible decision bad for almost everyone” by the Cato Institute.
Intel called the agreement “historic” and said it was “deeply committed” to ensuring the world’s most advanced technologies were “American made.”
Founded in 1977 and based in Washington, D.C., the Cato Institute is a think tank specializing in public policy. Scott Lincicome, vice president of general economics at Cato’s Herbert A. Stiefel Center for Trade Policy Studies, outlined six reasons for his view.
“Overall, it’s a horrendous move that will have real harms for U.S. companies, U.S. tech leadership, and the U.S. economy overall. Hopefully, they don’t go through with it,” he said on Friday on X (formerly Twitter).
According to Lincicome, the move would result in Intel’s (NASDAQ:INTC) decisions being increasingly driven by politics, not commercial considerations, thus harming its long-term viability. State-owned enterprises “are notoriously slow, bloated, & unproductive,” he said.
Intel’s (INTC) competitors, meanwhile, would now have to compete against it and “Uncle Sam for customers, capital, etc.”
“Bad for Intel’s customers who now must fear (and may face pressure to) they’ll be pressured/forced to buy Intel’s products, regardless of their merit. (Intel is STILL struggling to make a top-end chip.) This is in turn bad for the U.S. tech sector overall,” Lincicome said.
“Bad for U.S. companies that took (government) subsidies (CHIPs/IRA/etc): Are they next? Should they return the money? Will they preempt via political moves/lobbying? (Buyer beware, sure, but they didn’t sign up for this, and their investments may be distorted further),” he said.
“Bad for companies/industries plausibly linked to ‘national security’ – not only might Uncle Sam pressure them, but investors may think twice (about) them and instead look elsewhere for less-risky targets (here or abroad),” the policy researcher added.
Finally, the U.S. government’s investment in Intel (INTC) bodes ill for U.S. exports. Now that the legacy chipmaker would be a state-owned enterprise, its sales could be deemed as “government subsidies” by foreign administrations and could be thus targeted with “countervailing duties.”
“There are DOZENS of ways the U.S. (government) could support Intel – market and non-market support – that don’t involve taking a massive shareholding stake in the flailing company. Subsidies, l/t contracts, visas, tariff relief, permitting relief, tax relief, etc etc. All better,” Lincicome said.
Shares of Intel (INTC) advanced +5.5% on Friday after the investment confirmation and amid a broader market rally. The U.S. investment marks a notable turnaround from just a few weeks ago when Trump called on the company’s top boss, Lip-Bu Tan, to resign over alleged ties to China.
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