ChatGPT prompt:
Intel valuation and US stake: the numbers don't seem to add up. At least I don't understand the numbers. It's being reported that Intel received $5.7 billion from the US government last night, giving the US government a 10% stake in the company. Today, the market value of Intel (INTC) is $106.19 billion. Did the US get a great deal? Ten percent of $106.19 billion is about $11 billion and the US government got a 10% stake in Intel for only $5.7 billion? Perhaps the difference is debt?
ChatGPT reply:
What’s Going On with the U.S. Stake in Intel?
You’ve correctly identified the puzzling part: how could the U.S. get a 10% stake in Intel for $8.9 billion, when 10% of the company’s market value (~$106 billion) would typically be about $10–11 billion? Let’s unpack that fully:
1.
Conversion of Grants, Not a Cash Purchase
The U.S. didn’t pay new cash to Intel. Instead, it converted $5.7 billion in unpaid CHIPS Act grants and $3.2 billion from the Secure Enclave program into equity—totaling $8.9 billion. These funds were already committed to Intel under prior legislation and agreements, not freshly allocated.
2.
Discounted Share Price
Intel issued 433.3 million primary shares to the U.S. government at a price of $20.47 per share. This represented about a $4 discount from the market price (~$24.80 at announcement time), making the effective valuation of a 9.9% stake around $8.9 billion instead of the implied market figure of $11 billion.
3.
Total Funding vs. Equity Value
While the U.S. invested $8.9 billion (via grant conversion), this amount is close—but not equal—to a direct market valuation of 10%. The “missing” $2–3 billion difference stems from the discount and the nature of using grant obligations rather than fresh capital.
Is This a Great Deal for the U.S.?
Financially? Yes, from a purely valuation perspective, the U.S. acquired a ~9.9% stake at a discount relative to Intel’s current market cap.
Strategically? There’s more complexity. Intel and critics warn the government stake—especially given Intel’s heavy reliance on international sales (76% in 2024) —may harm global business relationships and create geopolitical risk.
Final Thoughts
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The reason the numbers don’t “add up” at first glance is because the U.S. basically converted existing grant obligations into discounted equity, rather than paying new cash at market price.
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So while the U.S. did get a valuable equity stake, it’s important to remember it came at the expense of Intel’s prior subsidy commitments—not fresh taxpayer funds.
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The true cost was $8.9 billion versus what would have been around $11 billion at market—a ~20–25% savings.
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But the long-term implications—both economic and political—are still being debated.
Let me know if you’d like a breakdown of how this compares with other government interventions or further context on Intel’s financial fundamentals.
