America Nationalizes — No — Invests in Intel

President Trump, casting himself as the nation’s top investment guru and seeing opportunity in Intel, announced the government’s $8.9 billion investment in Intel for a ten percent stake in the company. The money comes from Biden’s Chips Act, the purpose of which was to create more onshore chip manufacturing. Intel had already received $2.2 billion from the first tranche of Chips funding.

Was it a great deal for America? If Intel was such a good investment why didn’t U.S. venture capitalists rush in and invest in Intel instead of leaving it to the government? What did they know that Trump didn’t?

Here’s the answer. Intel, once the dynamo of computer chip technology and manufacturing, has fallen far behind semiconductor chip makers like Nvidia, TSMC, and AMD whose chips are driving the AI explosion. In 2024 Intel lost $18.8 billion. They lost $3.2 billion in the latest quarter while Nvidia’s sales were up 56%. One could say Intel is a failing company. It’s a sad comedown for a wonderful
pioneering company.

The lone private investor was Japanese investment group Softbank’s proposed $2 billion investment in Intel. Would they have made this investment for reasons other than to curry favor with Trump? Maybe. Maybe not. They do have significant investments in other projects in the U.S. Also, Intel’s latest CEO, the one whom Trump demanded be fired, sits on Softbank’s board. 

I think Deal-Maker-in-Chief Trump will make more investments like Intel. He was already crowing about Intel’s stock rising after the Trump deal.

What we are talking about here is called “industrial policy” or “when governments deliberately guide economic development by backing selected industries, instead of leaving outcomes entirely to free markets.” 

As Council of Foreign Relations Senior Fellow Edward Alden put it:

“It’s about the government putting a thumb on the scale, rather than just assuming that market outcomes are going to produce the maximum benefit.”

Democratic Socialist Senator Bernie Sanders thinks industrial policy is a great idea. Despite what Bernie thinks, market outcomes always produce the maximum benefits. When they don’t, companies go bankrupt. 

The one thing free market capitalism is good at is weeding out the unprofitable. This is what Austrian theory economist Joseph Schumpeter called “creative destruction.” When a failing company goes broke, the destruction of valuable capital stops and remaining resources can be redirected to successful businesses; you know, the ones that create jobs, that invest in productive means and make us all richer. 

History shows that governments have been notoriously bad investors in private companies. Government decisions are mostly political decisions, and their investment outcomes have been exemplars of failure and waste despite keeping them artificially alive. 

While proponents of industrial policy claim they won’t interfere with company operations, the reality has been otherwise. They tend to force companies to conform to political goals, like better worker benefits, preventing layoffs and closing facilities, and shaping the direction of company outcomes toward “social benefits” rather than profits.

Intel may fail. Even with the government’s investments, it still may fail. Their failure to keep up with the evolution of the chip business has dug them a very deep hole, and, according to analysts, their chips are not what the market wants. 

A failed Intel is not something Trump wants to happen on his watch. He’ll do anything to keep it going. If they continue to lose money and are on the brink of insolvency he’ll prop it up with more “investments” and subsidies. The government will get control of their board of directors. He’ll fire existing management and put in his cronies to run it. He’ll direct the military and other federal departments to buy Intel chips. He’ll coerce other companies like Apple to invest in Intel or buy their chips. He’ll strongarm Nvidia and AMD to “share” their technology with Intel. Perhaps he’ll have the government nationalize Intel in the name of “national security.”

I can already hear the chorus of those claiming we must protect U.S. companies like Intel for reasons of national security. Must we? Taiwan Semiconductor Manufacturing Company (TSMC) and Nvidia have heard the chorus and have already announced huge projects in the U.S. TSMC – who makes chips for many companies including Nvidia – is building huge manufacturing facilities in Arizona. Nvidia will invest up to $500M over the next four years in AI facilities. So by onshoring the chip business the national security
issue is moot. 

The Intel deal is a bad precedent. Politicians and bureaucrats are the last ones who should be making investment decisions with our money. It opens the door for politicians to support crony companies they favor. Companies come and go, and the result when the government doesn’t interfere is progress.