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Speaker 3: Chairs for Intel finished up seven point four percent today,
Speaker 3: this after Bloomberg reported exclusively that the Trump administration is
Speaker 3: said to discuss taking a steak in Intel. The US
Speaker 3: government potentially taking a steak in the chip maker, which
Speaker 3: would help support the company's effort to expand domestic manufacturing.
Speaker 3: This is according to people familiar with the plan. I
Speaker 3: want to bring in Tom Giles, he's senior executive editor
Speaker 3: for Global Technology. Tom can't stop talking about this story.
Speaker 3: Also in the context of what happened earlier this week
Speaker 3: with Nvidia and AMD, what's happened with MP Materials, and
Speaker 3: the four hundred million dollar investment from the DoD Us
Speaker 3: steal as well, it really just feels like we're in
Speaker 3: a new era when it comes to industrial policy. What
Speaker 3: does it mean to you?
Speaker 2: You know, the Trump administration is doing some really unconventional
Speaker 2: things when it comes to trying to shape and influence
Speaker 2: industrial policy and US corporations. Not a ton of precedents
Speaker 2: for this, at least not in the US. We've seen
Speaker 2: it in other types of economies where the government believes
Speaker 2: it's its role to shape industry and shape the direction
Speaker 2: of companies. That doesn't always end well. I'm a little
Speaker 2: surprised that the stock rallied as much as it did.
Speaker 2: To be totally honest with you, I think in the
Speaker 2: near term, investors are looking at, hey, look, this is
Speaker 2: a bit of money. Think of it maybe as a
Speaker 2: bailout for Intel. Help the company get its financial house
Speaker 2: in order and accelerate these plans to build a foundry
Speaker 2: in Ohio.
Speaker 4: On its face, all of that stuff sounds good. Go ahead.
Speaker 3: Well, I'm I'm glad you brought up the term bailout
Speaker 3: because I was talking to Carol about this. It kind
Speaker 3: of also feels reminiscent of you know, we talked about
Speaker 3: the US taking stakes and companies. It's not unprecedented. During
Speaker 3: the financial crisis, we saw this happen with rescuing banks.
Speaker 3: We saw it happening with rescuing automakers. The question I
Speaker 3: have for you, and it really sticks to it doesn't
Speaker 3: always end well. Is the concern about when you have
Speaker 3: investment from the US government, the government picking winners and
Speaker 3: losers when it comes to a so called quote unquote
Speaker 3: free market.
Speaker 4: That's not a really it's not a very free market.
Speaker 4: This isn't the principles.
Speaker 2: Hence the quotes that I that I studied, certainly in
Speaker 2: in macro and you know, all all the all the
Speaker 2: economics courses, all the finance courses that I've taken, don't.
Speaker 2: Really this doesn't look like the capitalism that we learned
Speaker 2: about growing up. What this is is and there's a
Speaker 2: difference between a bailout per se and a government taking
Speaker 2: a financial stake.
Speaker 4: This is about an ongoing relationship.
Speaker 2: And again, in the short term, I see why the
Speaker 2: stock popped right, it's seen as like, hey, Intel could
Speaker 2: use could get help wherever, you know, wherever it can.
Speaker 2: Longer term, do you really want the government? Are the
Speaker 2: government's interests aligned with those of shareholders? The government might
Speaker 2: might want to shape things for its own political interests,
Speaker 2: but are those the interests the long term interests of
Speaker 2: the shareholders of the company.
Speaker 3: I think that's a really good point. And I would
Speaker 3: also say, Tom, since we're talking about sort of the
Speaker 3: philosophical definition of capitalism right now, that one could maybe
Speaker 3: listen to our conversation or watch our conversation and say,
Speaker 3: wait a second, we've never really lived in a free
Speaker 3: market when local and federal subsidies power so much of
Speaker 3: this economy. I mean, you look at corn farming, for example,
Speaker 3: agriculture in the US. You look at subsidies that are
Speaker 3: given by states to llure bi business is we all
Speaker 3: remember what happened with Fox con in Wisconsin for example.
Speaker 3: That should be an entirely different conversation. But any any
Speaker 3: you know, you name it. There are Boeing in South Carolina,
Speaker 3: for example. Those sorts of things. There are different reasons
Speaker 3: that companies go.
Speaker 4: Places tax breaks all over the place.
Speaker 2: You know, the city of San Francisco just down the
Speaker 2: street incentivized Twitter to locate its headquarters right in central
Speaker 2: San Francisco, and they have lots of incentives. Think about
Speaker 2: the corporate tax cuts that we've seen in recent administrations.
Speaker 2: Those are all ways that the government is sort of
Speaker 2: giving financial incentives to these companies and incentivizing them to
Speaker 2: make investments in a city, in a state, in a
Speaker 2: county for example. There's a difference between that and taking
Speaker 2: a long term stake in a company.
Speaker 4: And remember the.
Speaker 2: Thing that I you know, I'm not a I'm not
Speaker 2: an authority on corn farming, but I do know Silicon Valley,
Speaker 2: and if you think about how the way things have
Speaker 2: run here, things have gone historically over decades. The precedent
Speaker 2: is Company X in Silicon Valley, in the tech industry
Speaker 2: says to DC, stay out of our hair, leave us alone.
Speaker 4: For the most part.
Speaker 2: We'll build, will create jobs, will build new and innovative
Speaker 2: technology that's going to change the way you live and
Speaker 2: work and the way we do business. And that has
Speaker 2: historically been the case. Government has had a relatively hands
Speaker 2: off stance towards Silicon Valley, but that is changing dramatically,
Speaker 2: and it's changing much more quickly under the Trump administration
Speaker 2: than it has in recent memory as long as I
Speaker 2: can remember covering this industry. What are the long term implications.
Speaker 2: I don't think people are really thinking about that right now.
Speaker 1: It's really good, kind of mind boggling. We're talking with
Speaker 1: Tom Giles, senior executive editor for Globe Tech out there
Speaker 1: on the West Coast here in our Bloomberg Interactive Broker studio.
Speaker 1: Ryn Guld just coming back into our studio Bloomberg News
Speaker 1: Deals reporter. He along with Josh Wingrove and Leanna Baker
Speaker 1: breaking this story. It is our most read on the
Speaker 1: Bloomberg Tom stay with us, Ryan, I want to roll
Speaker 1: you into this conversation. Remind everybody what you found out,
Speaker 1: and you know, do we have any insight or do
Speaker 1: you guys have any insight about how much the Trump administration,
Speaker 1: which has been called an activist administration, would want to
Speaker 1: be involved on an ongoing basis if it made this investment.
Speaker 5: Carol, We have very few details as to the numbers.
Speaker 5: I mean, it's something we're obviously looking to find out
Speaker 5: at this point. But I think it's just worth recapping
Speaker 5: that just how novel this type of structure would be
Speaker 5: or could be. I think I came on here earlier
Speaker 5: on and said that the very good parallels to be
Speaker 5: drawn between MP Materials and the dard that deal. I
Speaker 5: think if you just break that down, what did that
Speaker 5: mean for MP Materials and what could it mean for Intel?
Speaker 5: I mean, you look at that deal, it's something like
Speaker 5: you know, Gary and he purchases loans, private financing, equity investment.
Speaker 5: I think these are all types of things that the
Speaker 5: government perhaps feels. And again this is what you would
Speaker 5: think from a sort of outside view looking in that
Speaker 5: if you give confidence capital in this sense, which I
Speaker 5: think is a good way to think about what this
Speaker 5: would be for Intel shareholders. If you give confidence capital
Speaker 5: to Intel as the you know, the most credit worthy
Speaker 5: institution in the world, coming in and saying where behind you,
Speaker 5: we're here for the long term, that's a massive draw,
Speaker 5: especially if you're Intel and you're looking to bring in
Speaker 5: customers like Apple or Qualcom, which by the way, has
Speaker 5: been its mission for a long long time to make
Speaker 5: its found be solvent.
Speaker 1: Tom, is that what Intel needs? Confidence capital? Is that
Speaker 1: what's going to be the turnaround key for this company
Speaker 1: that's been kind of struggling for a while.
Speaker 4: It has been struggling.
Speaker 2: I mean you think about what where they're lacking, right,
Speaker 2: They have fallen behind technology technologically, particularly in an age
Speaker 2: of AI.
Speaker 4: They are they have lost market share.
Speaker 2: Lipputan, the CEO, has come in and he has been
Speaker 2: cutting jobs and taking some hard steps financially to shore
Speaker 2: up them from a financial perspective, but in terms of products,
Speaker 2: in terms of like making themselves attractive, making themselves the
Speaker 2: place that customers around the world want to come.
Speaker 4: For their chip making needs.
Speaker 2: That's something where they've fallen desperately behind, and so if
Speaker 2: you have a foundry, I mean, on its face, the
Speaker 2: idea of building a foundry, that's that's an alternative to TSMC. Right,
Speaker 2: this this Taiwan based mammoth company that that is making
Speaker 2: most of the most advanced chips in the world. Customers
Speaker 2: want an alternative to that. Ryan mentioned Apple in Nvidia,
Speaker 2: they all would like to have alternatives to TSMC. You
Speaker 2: want you don't want someone to have a monopoly, right,
Speaker 2: So there are certain things about this idea of advanced
Speaker 2: this chip making capabilities for Intel in Ohio on it
Speaker 2: it makes sense, but it's really hard for a company
Speaker 2: that's struggling financially to get that off the ground. So
Speaker 2: again getting back to that near term equation, it makes
Speaker 2: sense for them to get a capital infusion in the
Speaker 2: near term. Longer term, does it make sense for the
Speaker 2: federal government to be making decisions and to be influencing
Speaker 2: the direction of companies. In many instances, the interests of
Speaker 2: the government and the shareholders may be very much aligned,
Speaker 2: but there will come a day where the government may
Speaker 2: want to politicize things in a way that doesn't work
Speaker 2: to the longer term advantages of shareholders. That's the thing
Speaker 2: that people need to be asking hard questions about right now.
Speaker 1: Yeah, exactly, Tom Giles so appreciative, Senior executive editor for
Speaker 1: Global Technology with his view and reporting there also on
Speaker 1: Intel Industrial is still up about two point eight percent
Speaker 1: here in the aftermarket.
Speaker 3: I want to keep Ryan Gould in here as part
Speaker 3: of the team that broke the news that's still moving
Speaker 3: shares of Intel higher once again more than seven percent
Speaker 3: to the upside earlier in the session, up another two
Speaker 3: point nine percent as we speak, right I want to
Speaker 3: go to you off of what Tom just said, the
Speaker 3: difficult questions that need to be asked right now, because
Speaker 3: you and the team right about the President and his
Speaker 3: administration are adamant about boosting domestic champions and sectors that
Speaker 3: it deems critical to combating China on national security grounds.
Speaker 3: I can imagine there are a lot of companies out
Speaker 3: there with executives who are raising their hands and saying,
Speaker 3: wait a second, I'm critical, where's my money?
Speaker 5: Exactly? I think Timmy Ray is a good point because
Speaker 5: if you're any other company that operates in semiconductive manufacturing
Speaker 5: or even semiconductive you know, chip design, Hey, this isn't fair. Yeah,
Speaker 5: I mean you would be looking on and thinking what
Speaker 5: is the power play here?
Speaker 1: Yeah, I mean a MAT's down twenty three percent fallowing
Speaker 1: it's latest quarterly update. I'm not saying anything is related,
Speaker 1: but it's like, hey, maybe I need Assi.
Speaker 5: Exactly and you know, if you think back, let's just
Speaker 5: retrace those steps a little bit. Some of these channel
Speaker 5: and some of these questions are being raised a couple
Speaker 5: of months ago, what a few months ago now, before
Speaker 5: Lipbutem became the CEO. When Pat left, you know, there
Speaker 5: was a big search that went underwear. They used a
Speaker 5: head hunter. They spoke to people like Gary Dickerson Ademet
Speaker 5: about the job. I mean they spoke to a ton
Speaker 5: of people about the job. There is actually only one
Speaker 5: person who really wanted that job for the challenge that
Speaker 5: is on the table right now, and that is Libbuten.
Speaker 5: Libu ten is currently in that seat. He turned up
Speaker 5: at the White House earlier this week, cut a fairly
Speaker 5: you know, confident figure walking into the White House grounds
Speaker 5: and is now on the face of this coming out
Speaker 5: with something that looks like a potentially very favorable deal
Speaker 5: at least in the short term, I think, to Tom's
Speaker 5: point earlier on at least in the short term for
Speaker 5: what you know, Intel is looking to do, which is
Speaker 5: right size its balance sheet, stems some of those losses
Speaker 5: and make sorry to use a Trump term, but you know,
Speaker 5: make Intel grade again.
Speaker 1: It's kind of wild, kind of wild before we get
Speaker 1: caught up in the exuberance. That is very easy to
Speaker 1: get caught up in this environment, especially when you've got
Speaker 1: a stock that pops seven percent in the regular trade,
Speaker 1: another three percent here in the aftermarket early stages like
Speaker 1: do you have any you guys talk to a lot
Speaker 1: of folks who reported this at it's a Bloomberg exclusive,
Speaker 1: it's a most red story. But do you have a
Speaker 1: feeling of again, I'm going to go back to kind
Speaker 1: of where this process maybe.
Speaker 5: I mean, we actually don't. I mean, that's one of
Speaker 5: the challenges, is, you know, finding out how big this is.
Speaker 5: I think you know where on the case. I'm sure
Speaker 5: many of our competitors are now in the case. But
Speaker 5: I think one of the things I'd point out is
Speaker 5: that the President said on truth Social this week that
Speaker 5: these meetings will be happening with Commerce and with Treasury
Speaker 5: this week. You can probably assume that there are a
Speaker 5: ton of people down in Washington right now, both on
Speaker 5: the Intel side and the government side, who are putting
Speaker 5: minds together to figure out exactly what it will require
Speaker 5: to get Intel into on a stronger footing. I think,
Speaker 5: you know, if you look at what Intel has said.
Speaker 5: It declined to comment I should note on the deal discussions,
Speaker 5: but it's said in a statement of Bloomberg that it
Speaker 5: remains deeply committed to supporting the Trump's efforts to strength
Speaker 5: in US technology and manufacturing leadership.
Speaker 1: Just quickly, we've not heard anything from the White House.
Speaker 5: Not yet.
Speaker 1: Okay, good to know you rock again, Ryan Gould, Deal's
Speaker 1: reporter here at Bloomberg News Again. Intel shares tim up
Speaker 1: here in the aftermarket after about a seven percent gain
Speaker 1: in the regular training session.