US Government’s Intel Stake Worth $14 Billion After Nvidia Deal

(Bloomberg) -- The US government’s bet on Intel Corp. is paying off in a big way after a surprise investment from Nvidia Corp. sparked the biggest rally in the chipmaker’s shares in nearly four decades.

Intel shares soared as much as 28% on Thursday after the firm announced that Nvidia had agreed to invest $5 billion in the company and co-develop chips for PCs and data centers. The move comes less than a month after President Donald Trump sealed a deal for a roughly 10% US government stake in Intel.

Thursday’s surge in Intel shares pushed the stock as high as $31.79, boosting the value of the government’s stake to about $14 billion, a $4.9 billion gain on paper since the deal was inked in August. Under that agreement, the US government said it would buy 433.3 million shares of Intel’s common stock at $20.47 per share.

Intel said in a filing last month that it had already issued 274.6 million shares to the Department of Commerce and issued the remaining 158.7 million shares into an escrow account that would be released to the government over time as the US makes disbursements to Intel under the Chips Act.

The Nvidia investment is the latest lifeline for Intel, which has struggled for years amid difficulties with its manufacturing business and as chips used in artificial intelligence have become the central growth area of semiconductors. 

To be sure, the companies didn’t offer a timeline for when the first products from the agreement would be on sale. The surge in Intel’s share price has also caused its valuation to balloon to levels not seen since the dot-com bubble. The company is trading at 57 times projected 12-month earnings, the highest level since 2001.

“Wall Street is filled with stories of companies that looked dead but managed to rise like a phoenix from the ashes,” said Ted Weisberg, a trader with Seaport Securities. “It is too early to know what this means, we will have to see, but this feels like a breath of fresh air.”

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