re: The US now owns 10% of Intel

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Easy long play.

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"We don't think any government investment will change the fate of its foundry arm if they cannot secure enough customers."

The chipmaker, once synonymous with American chipmaking prowess, has stumbled due to years of management missteps, ceding its manufacturing lead to Taiwan's TSMC and losing out on the race for artificial intelligence chips to Nvidia.

Now, at an impasse, Intel needs to prove it is capable of making advanced chips to attract customers. Reuters has reported that Intel's current 18A process - less advanced than 14A - is facing problems with yield, the measure of how many chips printed are good enough to make available to customers.

Large chip factories including TSMC swallow the cost of poor yields during the first iterations of the process when working with customers like Apple. For Intel, which reported net losses for six straight quarters, that's hard to do and still turn a profit.

"If the yield is bad then new customers won't use Intel Foundry, so it really won't fix the technical aspect of the company," said Ryuta Makino, analyst at Gabelli Funds, which holds Intel stock.

Makino, who believes that Intel can ultimately produce chips at optimal yields, views the deal as a net negative for Intel compared with just receiving the funding under the CHIPS Act as originally promised under the Biden Administration.

"This isn't free money," he said.

The federal government will not take a seat on Intel's board and has agreed to vote with the company's board on matters that need shareholder approval, Intel said. But this voting agreement comes with "limited exceptions" and the government is getting Intel's shares at a 17.5% discount to their closing price on Friday.

The stake will make the U.S. government Intel's biggest shareholder, though neither Trump nor Intel disclosed when the transaction would happen.

Intel's shares closed up 5.5% on Friday on news of the government's equity stake, but fell 1% in post-market trading after the chipmaker detailed the terms of the deal. They have risen 23% so far this year as Tan has announced huge job cuts.

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This seems like a terrible idea.

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