Intel Stock Drops as U.S. Wants to Take a Stake. Why Micron Is Falling, Too.

Commerce Secretary Howard Lutnick confirmed the government was in talks with Intel to take a stake in the company. (yishii9/Dreamstime)

Intel stock was falling Wednesday as shareholders digest the likelihood of the U.S. government taking a sizable stake in the company. Micron Technology and Taiwan Semiconductor Manufacturing could be about to face a similar demand, causing their stocks to slide on Wednesday.

Intel stock’s drop accelerated after CNBC reported Wednesday morning that the company is considering equity infusions with large investors at a discount to its current price, citing people familiar with the matter.

Intel declined to respond to a Barron’s request for comment.

This reporting comes after Japan’s SoftBank announced a $2 billion investment in Intel on Monday. SoftBank said it will buy Intel shares at $23 each, a slight discount to the chip maker’s $23.66 closing price on Monday.

Intel shares fell 6.8%% at $23.60 on Wednesday, reversing the previous day’s 7% rise. On Tuesday, Commerce Secretary Howard Lutnick confirmed in a CNBC interview that the government was seeking a stake in the company in exchange for the billions of dollars in funding it is set to receive under the Chips Act.

“It’s not governance; we’re just converting what was a grant under Biden into equity,” Lutnick said. “Nonvoting.”

While Lutnick didn’t confirm the potential size of the conversion, it was previously reported by Bloomberg that the U.S. government is considering taking a 10% stake in Intel. That would imply a position worth more than $10 billion—Intel is in line for up to $10.9 billion in grants from the Chips Act.

“This incremental dilution gives us a bit of pause, but the benefits of being on the right side of Trump and his potential successor may be worth it since Intel could literally become a bargaining chip (no pun intended) in potential trade deals,” wrote Melius Research analyst Ben Reitzes in a research note. “Also, customers could consider the benefits of currying favor with the Administration when considering Intel as a foundry customer.”

Reitzes has a Hold rating and target price of $25 on Intel shares.

While Intel might welcome the Trump administration’s involvement, its peers could be less eager to welcome the U.S. government as a shareholder in their own businesses. The Trump administration could pursue equity stakes deals in other companies set to receive funding, including Taiwan Semiconductor Manufacturing (TSMC), according to Lutnick.

TSMC, Samsung Electronics , and Micron are among the other major recipients of incentives under the Chips Act, which was passed under the Biden administration and allocated a total of $53 billion to boost semiconductor manufacturing in the U.S. The companies didn’t immediately respond to requests for comment early on Wednesday.

Micron stock was down 5.6%, while TSMC American depository receipts were off 2.6%.

If the U.S. government were to take a stake in Taiwan’s TSMC and South Korea’s Samsung—with the associated equity dilution—the investments would be politically sensitive. Taiwan’s state-run National Development Fund is TSMC’s largest shareholder, with a 6.4% stake. South Korea’s National Pension Service—a public pension fund—is a significant shareholder in Samsung.

Write to Adam Clark at adam.clark@barrons.com and Angela Palumbo at angela.palumbo@dowjones.com