WEBVTT - Instant Reaction: US Mulls Taking Stake in Intel

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>This is a breaking news update from Bloomberg, Instant reaction

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<v Speaker 2>and analysis from our three thousand journalists and analysts around

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<v Speaker 2>the world.

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<v Speaker 3>Chairs for Intel finished up seven point four percent today,

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<v Speaker 3>this after Bloomberg reported exclusively that the Trump administration is

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<v Speaker 3>said to discuss taking a steak in Intel. The US

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<v Speaker 3>government potentially taking a steak in the chip maker, which

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<v Speaker 3>would help support the company's effort to expand domestic manufacturing.

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<v Speaker 3>This is according to people familiar with the plan. I

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<v Speaker 3>want to bring in Tom Giles, he's senior executive editor

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<v Speaker 3>for Global Technology. Tom can't stop talking about this story.

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<v Speaker 3>Also in the context of what happened earlier this week

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<v Speaker 3>with Nvidia and AMD, what's happened with MP Materials, and

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<v Speaker 3>the four hundred million dollar investment from the DoD Us

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<v Speaker 3>steal as well, it really just feels like we're in

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<v Speaker 3>a new era when it comes to industrial policy. What

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<v Speaker 3>does it mean to you?

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<v Speaker 2>You know, the Trump administration is doing some really unconventional

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<v Speaker 2>things when it comes to trying to shape and influence

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<v Speaker 2>industrial policy and US corporations. Not a ton of precedents

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<v Speaker 2>for this, at least not in the US. We've seen

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<v Speaker 2>it in other types of economies where the government believes

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<v Speaker 2>it's its role to shape industry and shape the direction

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<v Speaker 2>of companies. That doesn't always end well. I'm a little

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<v Speaker 2>surprised that the stock rallied as much as it did.

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<v Speaker 2>To be totally honest with you, I think in the

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<v Speaker 2>near term, investors are looking at, hey, look, this is

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<v Speaker 2>a bit of money. Think of it maybe as a

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<v Speaker 2>bailout for Intel. Help the company get its financial house

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<v Speaker 2>in order and accelerate these plans to build a foundry

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<v Speaker 2>in Ohio.

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<v Speaker 4>On its face, all of that stuff sounds good. Go ahead.

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<v Speaker 3>Well, I'm I'm glad you brought up the term bailout

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<v Speaker 3>because I was talking to Carol about this. It kind

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<v Speaker 3>of also feels reminiscent of you know, we talked about

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<v Speaker 3>the US taking stakes and companies. It's not unprecedented. During

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<v Speaker 3>the financial crisis, we saw this happen with rescuing banks.

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<v Speaker 3>We saw it happening with rescuing automakers. The question I

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<v Speaker 3>have for you, and it really sticks to it doesn't

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<v Speaker 3>always end well. Is the concern about when you have

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<v Speaker 3>investment from the US government, the government picking winners and

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<v Speaker 3>losers when it comes to a so called quote unquote

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<v Speaker 3>free market.

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<v Speaker 4>That's not a really it's not a very free market.

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<v Speaker 4>This isn't the principles.

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<v Speaker 2>Hence the quotes that I that I studied, certainly in

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<v Speaker 2>in macro and you know, all all the all the

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<v Speaker 2>economics courses, all the finance courses that I've taken, don't.

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<v Speaker 2>Really this doesn't look like the capitalism that we learned

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<v Speaker 2>about growing up. What this is is and there's a

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<v Speaker 2>difference between a bailout per se and a government taking

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<v Speaker 2>a financial stake.

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<v Speaker 4>This is about an ongoing relationship.

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<v Speaker 2>And again, in the short term, I see why the

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<v Speaker 2>stock popped right, it's seen as like, hey, Intel could

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<v Speaker 2>use could get help wherever, you know, wherever it can.

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<v Speaker 2>Longer term, do you really want the government? Are the

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<v Speaker 2>government's interests aligned with those of shareholders? The government might

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<v Speaker 2>might want to shape things for its own political interests,

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<v Speaker 2>but are those the interests the long term interests of

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<v Speaker 2>the shareholders of the company.

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<v Speaker 3>I think that's a really good point. And I would

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<v Speaker 3>also say, Tom, since we're talking about sort of the

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<v Speaker 3>philosophical definition of capitalism right now, that one could maybe

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<v Speaker 3>listen to our conversation or watch our conversation and say,

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<v Speaker 3>wait a second, we've never really lived in a free

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<v Speaker 3>market when local and federal subsidies power so much of

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<v Speaker 3>this economy. I mean, you look at corn farming, for example,

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<v Speaker 3>agriculture in the US. You look at subsidies that are

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<v Speaker 3>given by states to llure bi business is we all

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<v Speaker 3>remember what happened with Fox con in Wisconsin for example.

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<v Speaker 3>That should be an entirely different conversation. But any any

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<v Speaker 3>you know, you name it. There are Boeing in South Carolina,

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<v Speaker 3>for example. Those sorts of things. There are different reasons

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<v Speaker 3>that companies go.

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<v Speaker 4>Places tax breaks all over the place.

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<v Speaker 2>You know, the city of San Francisco just down the

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<v Speaker 2>street incentivized Twitter to locate its headquarters right in central

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<v Speaker 2>San Francisco, and they have lots of incentives. Think about

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<v Speaker 2>the corporate tax cuts that we've seen in recent administrations.

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<v Speaker 2>Those are all ways that the government is sort of

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<v Speaker 2>giving financial incentives to these companies and incentivizing them to

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<v Speaker 2>make investments in a city, in a state, in a

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<v Speaker 2>county for example. There's a difference between that and taking

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<v Speaker 2>a long term stake in a company.

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<v Speaker 4>And remember the.

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<v Speaker 2>Thing that I you know, I'm not a I'm not

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<v Speaker 2>an authority on corn farming, but I do know Silicon Valley,

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<v Speaker 2>and if you think about how the way things have

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<v Speaker 2>run here, things have gone historically over decades. The precedent

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<v Speaker 2>is Company X in Silicon Valley, in the tech industry

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<v Speaker 2>says to DC, stay out of our hair, leave us alone.

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<v Speaker 4>For the most part.

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<v Speaker 2>We'll build, will create jobs, will build new and innovative

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<v Speaker 2>technology that's going to change the way you live and

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<v Speaker 2>work and the way we do business. And that has

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<v Speaker 2>historically been the case. Government has had a relatively hands

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<v Speaker 2>off stance towards Silicon Valley, but that is changing dramatically,

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<v Speaker 2>and it's changing much more quickly under the Trump administration

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<v Speaker 2>than it has in recent memory as long as I

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<v Speaker 2>can remember covering this industry. What are the long term implications.

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<v Speaker 2>I don't think people are really thinking about that right now.

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<v Speaker 1>It's really good, kind of mind boggling. We're talking with

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<v Speaker 1>Tom Giles, senior executive editor for Globe Tech out there

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<v Speaker 1>on the West Coast here in our Bloomberg Interactive Broker studio.

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<v Speaker 1>Ryn Guld just coming back into our studio Bloomberg News

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<v Speaker 1>Deals reporter. He along with Josh Wingrove and Leanna Baker

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<v Speaker 1>breaking this story. It is our most read on the

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<v Speaker 1>Bloomberg Tom stay with us, Ryan, I want to roll

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<v Speaker 1>you into this conversation. Remind everybody what you found out,

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<v Speaker 1>and you know, do we have any insight or do

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<v Speaker 1>you guys have any insight about how much the Trump administration,

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<v Speaker 1>which has been called an activist administration, would want to

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<v Speaker 1>be involved on an ongoing basis if it made this investment.

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<v Speaker 5>Carol, We have very few details as to the numbers.

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<v Speaker 5>I mean, it's something we're obviously looking to find out

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<v Speaker 5>at this point. But I think it's just worth recapping

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<v Speaker 5>that just how novel this type of structure would be

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<v Speaker 5>or could be. I think I came on here earlier

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<v Speaker 5>on and said that the very good parallels to be

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<v Speaker 5>drawn between MP Materials and the dard that deal. I

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<v Speaker 5>think if you just break that down, what did that

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<v Speaker 5>mean for MP Materials and what could it mean for Intel?

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<v Speaker 5>I mean, you look at that deal, it's something like

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<v Speaker 5>you know, Gary and he purchases loans, private financing, equity investment.

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<v Speaker 5>I think these are all types of things that the

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<v Speaker 5>government perhaps feels. And again this is what you would

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<v Speaker 5>think from a sort of outside view looking in that

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<v Speaker 5>if you give confidence capital in this sense, which I

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<v Speaker 5>think is a good way to think about what this

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<v Speaker 5>would be for Intel shareholders. If you give confidence capital

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<v Speaker 5>to Intel as the you know, the most credit worthy

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<v Speaker 5>institution in the world, coming in and saying where behind you,

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<v Speaker 5>we're here for the long term, that's a massive draw,

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<v Speaker 5>especially if you're Intel and you're looking to bring in

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<v Speaker 5>customers like Apple or Qualcom, which by the way, has

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<v Speaker 5>been its mission for a long long time to make

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<v Speaker 5>its found be solvent.

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<v Speaker 1>Tom, is that what Intel needs? Confidence capital? Is that

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<v Speaker 1>what's going to be the turnaround key for this company

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<v Speaker 1>that's been kind of struggling for a while.

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<v Speaker 4>It has been struggling.

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<v Speaker 2>I mean you think about what where they're lacking, right,

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<v Speaker 2>They have fallen behind technology technologically, particularly in an age

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<v Speaker 2>of AI.

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<v Speaker 4>They are they have lost market share.

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<v Speaker 2>Lipputan, the CEO, has come in and he has been

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<v Speaker 2>cutting jobs and taking some hard steps financially to shore

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<v Speaker 2>up them from a financial perspective, but in terms of products,

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<v Speaker 2>in terms of like making themselves attractive, making themselves the

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<v Speaker 2>place that customers around the world want to come.

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<v Speaker 4>For their chip making needs.

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<v Speaker 2>That's something where they've fallen desperately behind, and so if

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<v Speaker 2>you have a foundry, I mean, on its face, the

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<v Speaker 2>idea of building a foundry, that's that's an alternative to TSMC. Right,

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<v Speaker 2>this this Taiwan based mammoth company that that is making

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<v Speaker 2>most of the most advanced chips in the world. Customers

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<v Speaker 2>want an alternative to that. Ryan mentioned Apple in Nvidia,

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<v Speaker 2>they all would like to have alternatives to TSMC. You

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<v Speaker 2>want you don't want someone to have a monopoly, right,

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<v Speaker 2>So there are certain things about this idea of advanced

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<v Speaker 2>this chip making capabilities for Intel in Ohio on it

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<v Speaker 2>it makes sense, but it's really hard for a company

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<v Speaker 2>that's struggling financially to get that off the ground. So

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<v Speaker 2>again getting back to that near term equation, it makes

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<v Speaker 2>sense for them to get a capital infusion in the

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<v Speaker 2>near term. Longer term, does it make sense for the

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<v Speaker 2>federal government to be making decisions and to be influencing

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<v Speaker 2>the direction of companies. In many instances, the interests of

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<v Speaker 2>the government and the shareholders may be very much aligned,

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<v Speaker 2>but there will come a day where the government may

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<v Speaker 2>want to politicize things in a way that doesn't work

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<v Speaker 2>to the longer term advantages of shareholders. That's the thing

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<v Speaker 2>that people need to be asking hard questions about right now.

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<v Speaker 1>Yeah, exactly, Tom Giles so appreciative, Senior executive editor for

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<v Speaker 1>Global Technology with his view and reporting there also on

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<v Speaker 1>Intel Industrial is still up about two point eight percent

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<v Speaker 1>here in the aftermarket.

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<v Speaker 3>I want to keep Ryan Gould in here as part

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<v Speaker 3>of the team that broke the news that's still moving

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<v Speaker 3>shares of Intel higher once again more than seven percent

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<v Speaker 3>to the upside earlier in the session, up another two

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<v Speaker 3>point nine percent as we speak, right I want to

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<v Speaker 3>go to you off of what Tom just said, the

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<v Speaker 3>difficult questions that need to be asked right now, because

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<v Speaker 3>you and the team right about the President and his

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<v Speaker 3>administration are adamant about boosting domestic champions and sectors that

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<v Speaker 3>it deems critical to combating China on national security grounds.

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<v Speaker 3>I can imagine there are a lot of companies out

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<v Speaker 3>there with executives who are raising their hands and saying,

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<v Speaker 3>wait a second, I'm critical, where's my money?

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<v Speaker 5>Exactly? I think Timmy Ray is a good point because

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<v Speaker 5>if you're any other company that operates in semiconductive manufacturing

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<v Speaker 5>or even semiconductive you know, chip design, Hey, this isn't fair. Yeah,

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<v Speaker 5>I mean you would be looking on and thinking what

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<v Speaker 5>is the power play here?

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<v Speaker 1>Yeah, I mean a MAT's down twenty three percent fallowing

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<v Speaker 1>it's latest quarterly update. I'm not saying anything is related,

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<v Speaker 1>but it's like, hey, maybe I need Assi.

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<v Speaker 5>Exactly and you know, if you think back, let's just

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<v Speaker 5>retrace those steps a little bit. Some of these channel

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<v Speaker 5>and some of these questions are being raised a couple

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<v Speaker 5>of months ago, what a few months ago now, before

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<v Speaker 5>Lipbutem became the CEO. When Pat left, you know, there

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<v Speaker 5>was a big search that went underwear. They used a

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<v Speaker 5>head hunter. They spoke to people like Gary Dickerson Ademet

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<v Speaker 5>about the job. I mean they spoke to a ton

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<v Speaker 5>of people about the job. There is actually only one

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<v Speaker 5>person who really wanted that job for the challenge that

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<v Speaker 5>is on the table right now, and that is Libbuten.

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<v Speaker 5>Libu ten is currently in that seat. He turned up

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<v Speaker 5>at the White House earlier this week, cut a fairly

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<v Speaker 5>you know, confident figure walking into the White House grounds

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<v Speaker 5>and is now on the face of this coming out

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<v Speaker 5>with something that looks like a potentially very favorable deal

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<v Speaker 5>at least in the short term, I think, to Tom's

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<v Speaker 5>point earlier on at least in the short term for

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<v Speaker 5>what you know, Intel is looking to do, which is

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<v Speaker 5>right size its balance sheet, stems some of those losses

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<v Speaker 5>and make sorry to use a Trump term, but you know,

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<v Speaker 5>make Intel grade again.

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<v Speaker 1>It's kind of wild, kind of wild before we get

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<v Speaker 1>caught up in the exuberance. That is very easy to

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<v Speaker 1>get caught up in this environment, especially when you've got

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<v Speaker 1>a stock that pops seven percent in the regular trade,

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<v Speaker 1>another three percent here in the aftermarket early stages like

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<v Speaker 1>do you have any you guys talk to a lot

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<v Speaker 1>of folks who reported this at it's a Bloomberg exclusive,

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<v Speaker 1>it's a most red story. But do you have a

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<v Speaker 1>feeling of again, I'm going to go back to kind

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<v Speaker 1>of where this process maybe.

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<v Speaker 5>I mean, we actually don't. I mean, that's one of

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<v Speaker 5>the challenges, is, you know, finding out how big this is.

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<v Speaker 5>I think you know where on the case. I'm sure

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<v Speaker 5>many of our competitors are now in the case. But

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<v Speaker 5>I think one of the things I'd point out is

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<v Speaker 5>that the President said on truth Social this week that

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<v Speaker 5>these meetings will be happening with Commerce and with Treasury

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<v Speaker 5>this week. You can probably assume that there are a

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<v Speaker 5>ton of people down in Washington right now, both on

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<v Speaker 5>the Intel side and the government side, who are putting

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<v Speaker 5>minds together to figure out exactly what it will require

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<v Speaker 5>to get Intel into on a stronger footing. I think,

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<v Speaker 5>you know, if you look at what Intel has said.

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<v Speaker 5>It declined to comment I should note on the deal discussions,

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<v Speaker 5>but it's said in a statement of Bloomberg that it

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<v Speaker 5>remains deeply committed to supporting the Trump's efforts to strength

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<v Speaker 5>in US technology and manufacturing leadership.

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<v Speaker 1>Just quickly, we've not heard anything from the White House.

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<v Speaker 5>Not yet.

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<v Speaker 1>Okay, good to know you rock again, Ryan Gould, Deal's

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<v Speaker 1>reporter here at Bloomberg News Again. Intel shares tim up

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<v Speaker 1>here in the aftermarket after about a seven percent gain

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<v Speaker 1>in the regular training session.