Analyst Ming-Chi Kuo says President Donald Trump's $11 billion stake in Intel Corporation (NASDAQ:INTC) is a strong vote of confidence in the chipmaker's future but cautions that the investment won't immediately resolve its lag in advanced semiconductor technology.
Kuo: Deal Raises Intel's Valuation Floor
Kuo, an analyst at TF Securities, said Monday that the U.S. government's decision to invest $8.9 billion in Intel common shares--combined with previously awarded grants--signals that Intel is "too big to fail."
The government purchased 433.3 million shares at $20.47 each, giving it a 9.9% stake in the company.
"The U.S. government's investment doesn't guarantee the technology gain, but it prevents valuation pain," Kuo wrote.
He added that the equity structure is designed to avoid political interference, as the U.S. waived typical shareholder rights, including board representation and governance privileges.
See Also: American Airlines CFO Declares Worst Is Over, But Cautious Outlook Sinks Stock
Equity Structure Meant To Support Growth, Not Control
Because the investment comes via primary stock issuance, all proceeds go directly to Intel to fund operations and manufacturing.
Kuo noted that the choice of common stock over preferred stock avoids fixed dividend obligations and underscores that this is "not an emergency bailout but a long-term strategic endorsement."
Intel's stock has historically found strong buying support around $20 per share, Kuo said and this move "materially raises" that valuation floor while reassuring markets about Intel's role in rebuilding America's semiconductor base.
Why This Strategy Doesn't Apply To TSMC Or Samsung
Kuo said a similar model isn't feasible for Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) or Samsung Electronics (OTC:SSNLF), citing national security concerns, profitability levels and their global neutrality mandates.
"A foreign government taking an equity stake would mean ceding partial ownership of a critical national resource, which could create potential political risks," he wrote.
Trump's Announcement Amid Intel's Struggles
President Trump announced the stake on Friday, calling it a "great deal for America" and saying it would cement U.S. leadership in advanced chipmaking.
Intel has faced mounting challenges, including $18.8 billion in 2024 foundry losses, leadership turmoil, delays in its Ohio plant and yield problems with its 18A process technology.
The company posted $12.86 billion in second-quarter revenue, slightly above expectations, but reported an adjusted loss of $0.10 per share.
Fitch Ratings has downgraded Intel's credit, and analysts say competition from TSMC, Advanced Micro Devices, Inc. (NASDAQ:AMD) and Arm Holdings (NASDAQ:ARM) remains a hurdle.
Price Movement: Intel shares rose 1.05% in after-hours trading, according to Benzinga Pro data.
Benzinga's Edge Stock Rankings indicate that INTC is sustaining strong momentum across short, medium and long-term timeframes. Additional performance insights can be found here.
Photo Courtesy: Tada Images via Shutterstock.com
Read Next:
- Cathie Wood Dumps Palantir As Stock Touches Peak Prices, Bails On Soaring Flying-Taxi Maker Archer Aviation
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
