In what is a testament to the unusual nature of the funding-for-equity deal between the US government and Intel that was signed and dusted just last week, the financial airwaves are still choked with prized takes from the who's who of the financial world, with Morgan Stanley's Joseph Moore now adding to this cacophony with his relatively somber take.
As we noted in a dedicated post on Friday, the US government is now poised to convert $8.9 billion in grants earmarked for Intel - consisting of $5.7 billion in CHIPS Act grants that are yet to be transferred to Intel, plus the $3.2 billion Secure Enclave award from Pentagon - into an equity stake.
Under the proposed arrangement, the US government will acquire 433.3 million newly issued Intel shares at a price of $20.47 per share, which is equivalent to a 9.9 percent stake in the company. Critically, the US government's stake will be of a passive nature, devoid of any representation within the board of directors.
Also, perhaps in a bid to make it slightly more convoluted for Intel to spin off a majority stake in its foundry division, the US government has negotiated a 5-year warrant that would be priced at $20 per share, giving the government the right to purchase an additional 5 percent of Intel common shares should the company sell over 49 percent of its foundry business.
Of course, the Trump administration believes this deal would serve as a panacea of sorts for Intel, allowing the chipmaker to get "its act together," as per the comments delivered by the White House economic adviser, Kevin Hassett, just moments ago on CNBC.
The reality, however, is likely to be a bit more nuanced. For instance, Morgan Stanley's Joseph Moore believes that Intel's turnaround would be a lengthy affair, with no simple remedies available. The analyst declared in a just-published note:
"The Intel recovery has to start with an improved microprocessor roadmap, and there is no quick fix."
Morgan Stanley remains unconvinced of Intel's overarching foundry strategy, criticizing its "multiple iterations" that now span "multiple decades."
Critically, Moore believes that Intel should prioritize the stabilization of its microprocessor market share, as a failure to do so would make it a lot more difficult to achieve the requisite scale that would then justify aggressive investments in advanced nodes such as the next-gen 14A process.
In what Moore believes is an indictment of Intel's new-gen technology, its older-gen products that are based on the 10nm and 7nm nodes are now sold out, as per Intel's own disclosures, which suggests that customers view those products as better value compared with the newer Intel 4 products.
On the US government's equity stake in Intel, Moore argues that “if that money has strings attached that force Intel’s hand strategically, it's not the best path," especially as the future of Intel's foundry should be based solely on financial and strategic calculus, not patriotic moves.
To highlight the dire situation at Intel's foundry division, the Morgan Stanley analyst notes that the unit is losing over $10 billion annually, burdened with more than $20 billion in net debt and further project commitments, making breakeven uncertain.
"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."
While appreciating the "refreshing conservatism to forecasting" that has become a permanent fixture at Intel during the continuing tenure of Lip-Bu Tan as the CEO, Moore believes Intel can easily generate solid returns by regaining share in microprocessors and aligning costs to around $60 billion of revenue, for such a scenario does not rely on new fabs or complex government interventions.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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