There seems to be a growing number of people who are investing in Intel’s stock because they’re under the impression that the United States will not let Intel fall into bankruptcy. This is a mistake.
“the us wont let intel fail”
The United States absolutely will let Intel fail. President Elect Donald Trump doesn’t like “losers” and Intel is a loser. And considering Republican Congressmen are compliant to Donald Trump’s wishes, they could easily let Intel fail.
CHIPS Act money isn’t enough to save Intel and Republicans want to end the CHIPS Act anyway.
The Federal Government could let Intel fail and then direct another company to operate its fabs, which is really the only part they care for. It could pull a GM, wipe out current shareholders, and reform the company without its design business. The fabs are everything and from the view of Congressman there are plenty of design firms already who can do Intel’s work. They’d just sell off the intellectual property and the Treasury Department will be several billion dollars richer while the design portion of Intel goes “Poof!”. Or Qualcomm will get its way and will purchase Intel’s design business. Either way.
There are a multitude of options open to the US Government and plenty of them let Intel fail.
You should not be gambling that the United States will rescue Intel BEFORE a bankruptcy. Everything is pointing to a bankruptcy being THE way to get what Congressmen want. They want their money back from the CHIPS Act and taking over and milking Intel like they did GM is the way to do it. Current shareholders will be wiped out. The new shareholder will be the US government. They’ll get to point Intel in whatever direction they feel like. That’s a very attractive scenario to people who enjoy power.
My point is that ultimately bankruptcy / failure is an option.
My preferred solution is to directly fund Intel until its fabs are finished and its first large customers are secured. This could be done through long dated low interest bonds or preferred stock. It could be done solely for national security reasons without any compensation other than the fact that the United State’s national semiconductor champion is healthy once again. It could be a bit harsher and Intel could issue new common shares directly to the government.
But direct funding is the absolute least popular solution in the Federal Government. The CHIPS Act doesn’t actually provide Intel with enough money to be safe from bankruptcy. And a CHIPS Act II is apparently out of the question thanks to Republicans. So yeah the government intervention options that are left aren’t too generous to Intel’s shareholders.
We all better hope Intel wakes the heck up and fixes things before government intervention is necessary.
This article is speculative in nature and not financial advice. If you want financial advice see a financial advisor.
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