Intel, the American SOE?

It's not just a repudiation of America's tradition of free private enterprise; it doesn't even make any business sense.

When I wrote my last Substack piece, “The Smuggler’s Pipeline of Nvidia AI GPUs,” I talked about how (and why) nobody in China wants anything to do with Intel’s AI GPUs, and how a potential U.S. government stake in Intel will further kill any of its remaining aspiration to try to sell to China — something that apparently President Donald Trump is not entirely opposed to Nvidia, another American company, doing. So many contradictions, you can’t help asking, what is going on in the president’s mind?

In a securities filing last Friday, Intel is obligated to provide a list of “risk factors” associated with a potential government stake in the company. They are:

• “The timing of consummation of the transactions and the receipt of funding, and the ability to satisfy the conditions to funding, remain uncertain.” — The funding refers to the $5.7 billion in unpaid grants from the CHIPS and Science Act subsidies in 2022, and $3.2 billion for the Secure Enclave program, both promised to Intel by former President Joe Biden.

• “The transactions are subject to risks from changes in laws, regulations, or their interpretations, as well as shifts in federal administration and congressional priorities.” — Yeah, much like when you thought you got a grant, and you don’t even have to pay it back, and then you’re told you have to sell your shares to the government.

• “The financial, tax and accounting impacts of the transactions are being evaluated and are uncertain.”

• “The transactions eliminate the Company’s contractual rights to receive future funds under the DFA and Secure Enclave in the form of grants and may limit its ability to secure grants from government entities in the future.”

• “The transactions are dilutive to existing stockholders.” — Not only that, the company will get no additional injection of capitals. What a raw deal!

• “The US Government’s equity position in the Company reduces the voting and other governance rights of stockholders and may limit potential future transactions that may be beneficial to stockholders.”

• “The Company’s non-US business may be adversely impacted by the US Government being a significant stockholder.” — Just like, when the U.S. sanctions Chinese state-owned companies, or even others that aren’t even SOEs but just deemed to be “close to the regime” (such as Huawei), now what do you think China and some other countries may do about Intel? Everyone will first start to ask, “are there backdoors?” I guess Intel can kiss its Chinese market goodbye. More on that later.

• “The Company may experience other adverse consequences resulting from the announcement or completion of the transactions.” — All the other unknowns.

Well, these are big deals, loud warnings! Good that at least this country’s securities laws still require (and allow) companies to tell these truths. Some other countries may have already called these disclosures “fake news,” or ban them altogether. Maybe the U.S. is getting there too, not, luckily, not yet.

More on how Intel will lose the China market. Intel derives $15.5 billion out of its total $53.1 global revenues out of China. That’s 29% of its global sales! That is more than double Nvidia’s 12-13% dependence on Chinese sales (black market aside)! And you see Chinese government already trying to tell its companies not to buy Nvidia AI GPUs. When Intel becomes an US SOE, do you think they will tell companies to not even buy Intel’s x86s? Do you think China should demand the U.S. balance the Chinese trade deficit between its Huawei and the US SOE Intel?

Ironically, Intel CEO Lip-Bu Tan said, “I don’t need the grant. But I really look forward to having the U.S. government be my shareholder.” His company’s securities filings told all the negatives, though, and he hasn’t really said anything about the positives and why. Did he say that under duress? After all, a week or two ago, it was almost like he was going to lose his job.

When the U.S. has been bashing China over the years about how it provides subsidies to its firms, well, at least China does not seem so keen to order their companies to give over shares. And you have to wonder what is going through the minds of all the companies that “benefited” from the CHIPS and Science Act in the last couple of years. Other U.S. firms like Micron, Texas Instruments, Corning, GlobalFoundries, etc.? And foreign firms like TSMC and Samsung? Are they beginning to look over their shoulders and think twice? It’s like you thought you got a “free gift” and ended up with having to pay for it with the deed of your house.

The Conformist America?

To his credit, former Vice President Mike Pence said in an interview last week that the U.S. is about free private enterprise, not state-owned companies, and urged the president to rethink both the Intel equity stake and the Nvidia export tax. Of course the president will not listen to Mike Pence. We all know what he thinks about his former veep. Even if Pence is to be spared by being hanged, he lacks courage. End of discussion.

Over the past just over 200 days of President Trump in office in 2025, it is also quite amazing to see how formerly rational and even bipartisan commentators fall in line with the new reality. Case in point, a commentary just published by CSIS lauding the case for “investing in a national champion.” First, factually, there is no investment, it was a bait and switch of a previous grant in lieu of any additional investment. And then, the authors went on to say, “The idea that Intel should succeed or fail based on market forces alone ignores the reality of modern global competition.” Suddenly picking winners is good in the USA? This is beyond whether you believe industrial policies are valid tools or not. The market force will indeed reward or punish a company, period. What is at stake here is not the role of government in global market competition. It is simply whether such a move is good for Intel, or not. And, by god, it’s not good!

That brings me to another interview I read today, by Nick Clegg, most recently Meta’s former president of global affairs, and before that, the former UK deputy prime minister. He was talking about Silicon Valley being “the most conformist place” he has ever lived: “Everyone dresses the same, they drive the same cars, they listen to the same podcasts, they claim to read the same books. You get this extraordinary herd behavior and everyone thinks they’re being super insightful, but in fact everybody’s kind of following the same trend.“ From what I have seen in the last 200 plus days, it isn’t just Silicon Valley. It is a lot of media space, think tanks, academia, maybe all of America. A herd mentality of finding reasons to justify keeping in line with everything going crazy. “It’s not so out of line. It’ll be alright.” Well, get used to it. The chairman, president and CEO of America said, many more deals will come.