Hassett Believes Intel Will Improve with Cash Inflow, While Morgan Stanley States There’s No Immediate Solution

This information is presented for educational purposes only and does not constitute investment advice. The author holds no shares in any of the companies discussed.

US Government’s Equity Deal with Intel: A Complex Landscape

Last week, Intel reached a significant funding-for-equity agreement with the U. S.government, and the financial community continues to weigh in with their analyses. Morgan Stanley’s analyst Joseph Moore has offered a more cautious interpretation amid the broader dialogue that suggests this partnership could bolster Intel’s position in the semiconductor industry.

Details of the Agreement

The U. S.government is set to convert $11.1 billion in grants allocated for Intel into equity. This fund includes a combination of:

$5.7 billion in CHIPS Act grants yet to be transferred to Intel
$3.2 billion from the Secure Enclave award provided by the Pentagon
$2.2 billion in CHIPS Act grants already disbursed

In exchange, the government will obtain 433.3 million newly issued shares of Intel stock at a purchase price of $20.47 each. This transaction results in a 9.9% ownership stake; however, the government’s involvement will be non-intrusive, lacking a seat on Intel’s board of directors.

Contingency Warrant for Foundry Division

In an attempt to complicate potential spinoffs of Intel’s foundry division, the government has negotiated a five-year warrant at $20 per share that allows it to purchase an additional 5% of Intel shares, should the company sell off more than 49% of its foundry business.

HASSETT: INTEL WILL GET ‘ITS ACT TOGETHER’ WITH CASH INFLOW

— Walter Bloomberg (@DeItaone) August 25, 2025

Mixed Predictions on Intel’s Future

Amidst optimistic government rhetoric suggesting that this deal will help Intel get “its act together, ”as remarked by White House Economic Adviser Kevin Hassett, the realities of the situation are more complicated. Joseph Moore asserts that the turnaround for Intel is likely to be a drawn-out process with no magic solutions available.

“The Intel recovery has to start with an improved microprocessor roadmap, and there is no quick fix.”

Moore criticizes Intel’s far-reaching foundry strategy, pointing out that its various iterations have spanned decades without significant success. He emphasizes the necessity for Intel to solidify its microprocessor market share in order to create a foundation for substantial investments in cutting-edge processes like the upcoming 14A technology.

Current Challenges in the Foundry Division

Moore highlights a concerning trend where Intel’s older generation products, built on 10nm and 7nm nodes, are sold out, indicating greater consumer value recognition compared to the newer Intel 4 products. When examining the impact of the government’s equity stake, he cautions that any strategic requirements attached to the funding could impede Intel’s long-term strategic decisions, which should be driven by financial metrics rather than nationalistic pressures.

“Intel continues to explore restructuring paths, from maintaining the IDM 2.0 model that supports both processors and foundry, to reverting to IDM 1.0, or shifting toward a ‘fab lite’ approach. Each path carries trade-offs: IDM 2.0 has the greatest potential, but also the most risk if Intel cannot deliver performance leadership in servers.”

Moore acknowledges the cautious forecasting approach taken by Intel’s CEO, Lip-Bu Tan, recognizing that regaining ground in the microprocessor market could lead to healthy returns. He believes that aligning costs with approximately $60 billion in revenue could be achievable without the need for new factory investments or complex governmental interventions.

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