Trump’s Push for Intel Stake Raises Concerns for Tech Stocks

President Donald Trump positioned the government to benefit directly from semiconductor companies’ success with deals to take some of the revenue from Nvidia’s and Advanced Micro Devices’ sales of chips in China. (Getty Images)

A slump in U.S. tech stocks—led by a $156 billion decline in Nvidia’s market value—may be the result of more than worry over stretched valuations and uncertainty about Federal Reserve rate cuts. And that makes it harder to assess how far it will go.

The Nasdaq Composite was under sliding again on Wednesday, following the tech benchmark’s second-biggest decline since April, after Commerce Secretary Howard Lutnick effectively confirmed reports that the government is looking to take a 10% stake in Intel .

Reuters, meanwhile, reported that Lutnick is also pushing President Donald Trump to authorize equity stakes in other tech companies, including foreign-owned groups with U.S. operations, through the conversion of grants made under President Joe Biden’s Chips and Science Act. That could dilute the value of existing shareholders’ stakes, depending on how the conversions are set up.

“We’ll deliver the money which was already committed under the Biden administration [and] we’ll get equity in return for it,” Lutnick told CNBC in a Tuesday interview that focused on the government’s planned Intel stake.

Several U.S. companies were awarded funds under the Chips Act, including Micron Technology, Global Foundries, and Texas Instruments. Taiwan Semiconductor Manufacturing and South Korea’s Samsung Electronics were also given cash to develop operations in the U.S.

A coordinated White House effort to establish stakes in the tech sector, ostensibly to encourage the domestic return of chip-making facilities, would mark a sea-change in U.S. government industrial policy. Even the first step toward that—the talk of the government taking a stake in Intel—is already having unintended consequences.

Intel shares have rallied more than 30% so far this month as reports of government support and possible equity interest began to surface. Japan’s SoftBank confirmed a $2 billion investment, tied to the issuance of new Intel equity, earlier this week.

However, with no change in the group’s earnings outlook, which remains muted, the price of Intel stock has soared to 58 times the per-share earnings the company is expected to bring in over 12 months. That is the highest since 2002 and a level that makes for an unattractive entry point for taxpayers funds in a hypercompetitive market.

“Generally speaking, Intel is so far behind on the technology that [a government stake] may serve some purpose, but I don’t see the benefit to the American taxpayer, nor do I see the benefit, necessarily to the chip industry,” said Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments.

Concern is already starting to emerge that if the government takes stakes in other chip makers, particularly those in need of a manufacturing partner, those companies could be required to cooperate via government edict.

Trump breached a divide, positioning the government to benefit directly from chip makers’ success, when he brokered deals with Nvidia and Advanced Micro Devices that allowed the pair to sell chips into the China market in exchange for a 15% cut of that revenue.

Another investor focus could be SoftBank’s stake in Intel. The tech company’s investment would not only give the chip maker capital, it could pave the way for Arm Holdings to become a bigger customer of Intel’s foundry business, which makes chips for other players in the industry.

Melius analyst Ben Reitzes said the SoftBank investment could boost Intel’s growth prospects “in terms of ties to key customers and gaining favor with the Trump administration.” Masayoshi Son, who leads SoftBank, won praise from Trump as recently as April, when his company agreed to take part in Stargate, a $500 billion U.S. artificial-intelligence investment initiative.

Reitzes also thinks that Intel could become a bargaining chip in trade deals, while potential customers “could consider the benefits of currying favor with the Administration when considering Intel as a foundry customer.”

However, tech companies looking to win White House approval through business decisions, or paying the government directly for access to foreign markets, may not be serving shareholders’ best interests.

U.S. tech stocks are outperforming their international peers based on the margin and productivity improvements tied to AI advances and savvy management teams that have navigated supply chain and tariff challenges, argued Tengler, not their ties to the government.

“I’ve been around this business for a long time, and I’ve never seen the government make a savvy investment when they get involved in the private sector,” she added. “So let the private sector take over. They’ll fix the problems quickly.”

Write to Martin Baccardax at martin.baccardax@barrons.com