Shares of Intel (INTC 4.47%) are falling on Wednesday, down 7% as of 12:14 p.m. ET. The drop comes as the S&P 500 and Nasdaq Composite fell 0.4% and 1%, respectively.
The struggling chipmaker's stock is sliding as investors await the U.S. government's decision over whether to take an equity stake in the company.
Intel stock dips as the U.S. government eyes an equity stake
Commerce Secretary Howard Lutnick told CNBC that the U.S. government was in talks with Intel about taking a sizable stake in the company after it was rumored that President Trump was considering the action.
The equity would come in exchange for the billions of dollars Intel was promised under the Biden administration's CHIPS Act. Given this was money Intel had already counted on, but may now have to trade a 10% stake to the U.S. government for, the news was not welcomed by investors. The move would lead to a dilution of existing stockholders' positions.
That being said, there would certainly be potential upside to the government taking such a substantial stake. Intel could gain more favorable terms with customers and vendors alike.
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This comes a day after it was announced that SoftBank would take a $2 billion stake in the ailing company, making it the fifth-largest shareholder.
What will Intel's turnaround strategy look like?
The company has been undergoing a significant transformation in its attempt to play catch-up in the critical artificial intelligence market. Part of this plan is a drastic reduction in its fabrication capacity, something the Trump administration is not pleased about. It's possible that the administration has been able to persuade Intel that a turnaround can be executed without the sacrifice of these domestic manufacturing capabilities.
The road ahead for Intel is rocky, but I think that it will eventually find its footing.
