Transcript
Ann Berry (0:01)
This episode is brought to you by State Farm. Checking off the boxes on your to do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone or using the award winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there spacs are back. We bust the jargon and unpack why Best Buy's new marketplace Will consumers buy it? And intel gets the lifeline. Will the stock stay up for Tuesday, August 19th it's Brew Markets Daily and I'm Ann Berry. More market details to come. But first, what a time to be Intel CEO Lip Block Bhutan first, the chip maker's leader fended off calls for his resignation just five months into the job, and from none other than President Trump. The president called out alleged conflicts of interest with Chinese technology companies. Now that was followed by a huddle at the White House and rumors that the US Government wants to buy a chunk of intel shares. And then just last night, the giant Japanese tech conglomerate SoftBank announced a 2 billion dollar investment into the company, all in just the past 11 days. So how did we get here and why does it all matter? Well, before this whirlwind of news, intel shares had lost 60% of their value over the last year as the company failed to gain traction in the artificial intelligence chip market. That's despite receiving nearly $8 billion in federal funding under the Chips and Science act, the bipartisan law enacted in 2022 to boost domestic semiconductor capabilities and reduce reliance on foreign chip production. Now, intel has been using those funds to expand into foundries or chip fabrication in Arizona and Ohio. But for all that building, customers haven't come and CEO Tan was brought in to clean up the mess. Let's listen to how he describes what he found.
John (2:03)
Unfortunately, the capacity investment we made over the last several years were well ahead of demand and were unwise and excessive. Our factory footprint has become needlessly fragmented.
Ann Berry (2:18)
Intel's chips have been plagued by quality problems. And as of Q2 this year, the company reported a feeble $53 million in external foundry revenue so far. Plus, and this is the real problem. No, no, quote, significant contracts secured. So let's go back to SoftBank, famed for a myriad of investments from Alibaba to Doordash, the conglomerate that has assets of about $300 billion has had its own issues following high profile losses in the likes of WeWork, which went bankrupt But Softbank has recently been getting its groove back, just posting its highest profit in four years and getting lots of attention for the sheer scale of its money in AI. SoftBank owns the majority of ARM, the semiconductor company with a nearly $150 billion market cap. It's also a leader in the Stargate project, a joint venture to build a US network of next gen AI data centers in which SoftBank's partners are Oracle and OpenAI, the ChatGPT maker in which, by the way, software Softbank's led several funding rounds. So if anyone has the contacts and the clout to get desperately needed new customers to intel, it's SoftBank. And that's why intel shares are soaring. And as for the rumors of the US government buying a 10% stake too, well, reports in the Wall Street Journal suggest that some of the CHIPS act funding provided to intel, and possibly more, could be converted from simple cash grants into actual equity ownership, which would make the US the company's single biggest shareholder if it happens. Now, we don't know yet for sure if the specific idea for intel has gained traction, but we're absolutely going to be watching. And here's why. It's another sign that in a policy shift for the U.S. the Trump administration clearly isn't shy about putting government cash into the shares of nationally strategic public companies. Recall, the Pentagon became the biggest shareholder in rare earth miner MP Materials with a $400 million investment just last month, and shares of that company is up 360% year to date as a result. Intel meanwhile up nearly 15% over the past five days. And we're going to keep watching now. If you're thinking about where to put your cash, check out Public, the sponsor of Brew Markets Daily. And before the show today, our producer John mentioned a feature he recently found.