More than a decade after “too big to fail” became a common and unwelcome phrase in many circles, the United States may have received another company with that label: American semiconductor giant Intel (NASDAQ: INTC).

In fact, after losing significant market share in microchips and having failed to fully keep up with the boom in artificial intelligence (AI) – a boom that has seen most of the company’s peers record meteoric growth – INTC has fallen 52.50% on the stock market since the start of 2024.

Such a fall forced Washington to begin considering a bailout plan, according to a November 1 statement. Semafor report.

Intel’s bailout plan: what we know

Yet as of press time on November 4, a possible bailout was still more of an emergency plan and, arguably, not even a full-fledged plan.

For example, authorities could grant Intel some $8.5 billion before the end of 2024, but at the same time they would be keen to avoid lump sum cash payments.

The hesitation to implement such a bailout may stem from American taxpayers’ poor taste for bailing out huge corporations.

Similar historical actions are sometimes seen as particularly negative because, in many cases, the same individuals who allowed their companies to need the government to save them remain at the helm decades later.

A prime example of this phenomenon is Jamie Dimon, who became CEO in 2006 and whose bank, JPMorgan (NYSE: JPM), received 25 billion dollars taxpayers during the Great Recession.

Elsewhere, several ideas for saving Itel have been suggested, including effectively breaking up the company and bringing together some of its peers – Qualcomm (NASDAQ: QCOM) and Arm Holdings PLC (NASDAQ: ARM) being mentioned by name – are taking over part of the company.

Why Intel Might Need to Save

A middle finger reason because Intel’s decline is due to the company’s inability to maintain a leading position in the industry.

Although anecdotal, the most illustrative example of the reasons for this trend comes in the form of deterioration of reputation as a manufacturer of components for personal computers.

In recent years, it has become extremely easy to find case gamers or technology enthusiasts recommending against purchasing Intel components and directing them towards advanced micro-devices (NASDAQ: AMD) or Nvidia (NASDAQ: NVDA).

This trend may – along with Nvidia’s role in the AI ​​boom – show how CEO Jensen Huang’s NVDA actions wealth became greater than the entire market capitalization of Intel.

Intel has also been hampered in its operations by arguably unprovoked errors. For example, the American giant lost a huge manufacturing discount with Taiwan Semiconductor Manufacturing (NYSE: TSM) due to insensitive comments from the company’s CEO.

Why Intel’s failure could pose a strategic threat to the United States

Whatever the situation – and whether or not Intel needs a bailout – there is a strong case for U.S. government intervention to protect the company.

While the bulk of semiconductor design and production is done overseas, Intel remains something of a bulwark for America, keeping the cutting-edge industry on home soil.

Additionally, potential total dependence on foreign companies would put the United States behind, as much of the industry is in Taiwan and South Korea, which despite their cordial alliance with America, are at the very borders of China and the first is even within the de jure borders of the People’s Republic.

Featured Image:

Ascannio. New Intel logo visible on the screen and blurred fingertip touching it in the dark. Digital image. Stone UK – September 2, 2020. Shutterstock, September 2, 2020. Retrieved date: November 4, 2024.