Intel (INTC 0.28%) has been struggling mightily in recent years. Not only did it post a multibillion-dollar loss last year, but its top line also declined. While $53 billion is still a lot of revenue, that tally from 2024 was down more than 30% from the $79 billion that Intel generated just a few years earlier in 2021.
Unsurprisingly, considering its troubling financials, the stock has been an atrocious holding; Intel has lost half of its value over the past five years. And while some might expect that to have left the chipmaker's stock a cheap buy, investors are likely concerned that it's nothing more than a value trap these days.
Recently, however, the U.S. government announced it would be taking a 10% stake in the tech company, which could add some stability to its operations. Could this make Intel a safer stock to hold for the long haul?
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Why the government investment could help the business
On Aug. 22, Intel announced a "historic agreement" with the U.S. government that took billions of dollars in grants that previously had been awarded to Intel under the CHIPS and Science Act of 2022 to support its construction of new chip foundries, and converted those funds into payment for a roughly 10% equity stake in the company for the government.
While some investors may worry what this might mean for the company's long-term strategy, and whether it may impact decisions, Intel notes that the investment will be a passive one, and that the government will have "no Board representation or other governance or information rights."
With the government having a stake in Intel, that may lead to further support and industry-friendly regulations to help the business succeed in the long run.
Why the agreement may give investors a false sense of security
On paper, everything looks fine, and having a passive investor with a lot of influence and money doesn't sound bad at all. But how things play out in reality can be a far different story. Last month, for example, President Donald Trump called for Intel CEO Lip-Bu Tan to resign, only to praise him a few days later.
This could be a sign of things to come because while the U.S. government may not have a seat on Intel's board, that doesn't mean that Trump won't try to further influence the company's actions through social media or other means. And regardless of whether it works or not, the potential for it to happen can have an impact on investors and their outlook for the stock.
Another thing to consider is also what might happen under the next administration. Federal policies can change drastically, which is why investing in a stock based on assumptions about government action can be risky.
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Key Data Points
Intel is still a risky stock to own
Having the government as a major investor also won't fix the problems related to Intel's business. The company is still struggling with profitability, and it has a long way to go to get back to breakeven -- particularly as it's investing heavily in efforts to grow its business. Last quarter, its sales were flat year over year, and its operating margin was negative 24.7%.
Without stronger financials and better growth prospects, it won't matter who or what is investing in Intel. For investors buying a stock for the long haul, fundamentals and growth prospects matter most. And unfortunately, those aren't Intel's strengths today.
For now, savvy investors should keep Intel's stock on their watch lists rather than buying it. There's still a lot of risk here.
