Nvidia And Intel Lead Tech Stock Drop As White House Reportedly Seeks Equity For CHIPS Grants
Topline
A broader decline for tech stocks was headlined by Nvidia, Intel and Palantir during intraday trading Wednesday, following a report the Trump administration may seek equity in firms receiving federal grants under the Biden-era CHIPS Act.
Lutnick said the government want to acquire an equity stake in Intel in exchange for grants earmarked under the CHIPS Act.
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Key Facts
Commerce Secretary Howard Lutnick is considering a plan in which the U.S. will gain equity stakes in chipmakers in exchange for grants given to them under the CHIPS Act, according to Reuters.
It’s not immediately clear how much of a stake the U.S. would seek in these companies.
Lutnick said late Tuesday the U.S. was eyeing a stake in Intel, after White House Press Secretary Karoline Leavitt earlier said the Trump administration was in discussions to potentially acquire 10% equity, valued at roughly $10.4 billion, that could make the U.S. the chipmaker’s largest shareholder.
The U.S. may expand its equity requests to other companies that are set to receive CHIPS Act funds, including Micron, TSMC and Samsung, Reuters reported.
How Have Markets Reacted?
The Nasdaq dropped nearly 290 points (1.3%) by around noon Tuesday, as shares of Nvidia (2%), Intel (7%), Palantir (5%), AMD (2%) and Broadcom led a broader tech selloff. Other firms, including Micron (5%), Tesla (3%), Amazon (2.1%), Apple (1.6%) and Microsoft (0.8%) also declined. In Asia, semiconductor maker TSMC’s shares dropped more than 2%.
Does The U.s. Acquire Stakes In Companies?
The U.S. does not regularly acquire equity in companies, though it previously took equity in some banks and automakers—including General Motors and AIG, among others—during the 2008 financial crisis. Equity has historically been taken by the U.S. in times of financial instability, including Chrysler in the late 1970s and defense-related industries during World War II. Some economists have argued equity held by the U.S. government could expose taxpayers to potential losses, while others believe U.S. investment could boost sectors.
What Has Trump Said About The Chips Act?
President Donald Trump has repeatedly bashed the Biden-era CHIPS Act and has threatened to scrap it. In his address to a joint session of Congress in March, the president said the CHIPS Act was a “horrible, horrible thing,” adding: “We give hundreds of billions of dollars, and it doesn’t mean a thing. They take our money, and they don’t spend it.”
Crucial Quote
Lutnick told CNBC: “The Biden administration literally was giving Intel for free, and giving TSMC money for free, and all these companies just giving them money for free. Donald Trump turns that into saying, ‘Hey, we want equity for the money. If we’re going to give you the money, we want a piece of the action.’”
Tangent
Earlier on Tuesday, Japanese investment giant SoftBank announced it had agreed to a deal to purchase $2 billion worth of Intel stock at $23 per share.
Further Reading
US examines equity stake in chip makers for CHIPS Act cash grants, sources say (Reuters)