For those fortunate souls who don’t understand the basics of modern markets and politics, this is an object lesson. Intel has “agreed to” the US government taking a 10% stake in the company.
This rather bland bit of almost-information contains a lot to extremely warily unpack. As a writer who is extremely tired of hardly literate “TLDR” overviews, I’ll try to be tactful. I just won’t try very hard. This situation is extremely tricky.
Let’s start with the Intel side:
Intel has been staggering along with its CPU chips, not doing much at all with producing AI chips, the supposed ultra-focus of the Trump administration. Surprisingly, the new Intel chip is getting some market traction with good reviews, but it’s still plodding along.
The intel stock price has also been bumping along downward from $64 in 2022 to $27 this week. The market hasn’t been particularly friendly. The news about US government interest in Intel caused a relative spike in the stock price in mid-August. Forbes seems to think the Intel stock could go back up to $60.
The real question is how much of an asset Intel can be to the US government in the superheated AI environment. Superficially, not very. Intel isn’t much of a player in AI. It doesn’t even have a nominal market position.
Some say it’s “crony capitalism,” which it could well be. If you include the typical upvaluing of companies by association with people and publicity, it does look like it. Nvidia has been accused of that, too, although Nvidia has had trouble staying out of the limelight, unlike Intel.
This is also known as “state capitalism,” in which nations take roles in direct capital investment and ownership. This was far more common in the mid-20th century, particularly in the English-speaking countries like Canada, Australia, and the UK.
However- state capitalism is also the direct antithesis of modern conservative doctrine which openly demands maniacal levels of privatization and deregulation.
It depends how naïve you are in terms of this particular move.
For instance; if you assume that state capitalism isn’t just another name for privatization. It could well be. What value does a 10% stake in Intel deliver to the US? IP values? A market platform for pet programs? Somewhere to put new patents?
How about nepotech, the extension of the administration’s torrid love affair with big rich tech companies? Now do you see why this is as much a market move as any sort of policy?
Or, perhaps, a place to put direct market values on specific assets? if this sounds like guesswork, it has to be guesswork. There are no clear parameters for what 10% of Intel may mean in dollar values. Nor can those values be fixed for any length of time. The market can raise and lower values on specific assets, especially tech assets, very easily.
Watch how this works, because a lot of money is likely to flow through this sudden interest in Intel.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
