The U.S. Made 50% on Its Intel Stock Purchase. This Investment Did Even Better.

The U.S. government has made a killing on its Intel stock stake. (AFP via Getty Images)

Nvidia shocked investors by taking a 5% stake in Intel —and the U.S. government is a big winner.

Last month, the federal government took a 433 million share stake in Intel at $20.47 a piece. Intel stock traded as high as $32.38 before closing at $30.57, up 22.8% on Thursday. The government is up about 50%, or $4.4 billion, on its “trade.” Nvidia shares gained 3.5%, closing at $176.24, while the S&P 500 and Dow Jones Industrial Average added 0.5% and 0.3%, respectively.

Its roughly $9 billion stake is now worth more than $13 billion. Not bad, especially since the purchase was made less than a month ago.

“That doesn’t quite match the paper gains DOD has seen since it invested in [rare earth miner] MP Materials in July, but it’s meaningful, nonetheless,” wrote Gordon Haskett analyst Don Bilson on Thursday.

The Defense Department, essentially, bought roughly 25 million shares of MP for $30, part of a plan to ensure rare earth magnet supply for the U.S. military. The value of that stake has more than doubled. The total gain, however, is closer to $1 billion.

Significant U.S. government ownership of public companies is something investors have been wrestling with lately. The federal government has taken stakes in companies in the past, mainly in times of distress. Things are a little different these days. Intel needed capital, but MP needed support to compete with Chinese rare earth miners. Commerce Secretary Howard Lutnick recently suggested that the government should own portions of defense contractors since the Defense Department was the number one customer.

“Upon seeing today’s news, our first thought is $5 billion is nothing for Nvidia and a small price to pay to bolster its standing with [President] Trump,” added Bilson. “It could, after all, use his help as China cracks down on Nvidia sales to Chinese companies. That being said, there seems to be a lot more going on here than just politics.”

That appears to be the case. The deal is reshaping the computer chip business as the global economy strains to adapt to all the changes brought by artificial intelligence.

Write to Al Root at allen.root@dowjones.com