Investors sound alarm: Trump "seizes" 9.9% stake in Intel, fearing the start of a new era of American state capitalism.

Notice that the actions taken by the US government to acquire stock in Intel Corporation through the "Chip Act" are causing some investors to worry that President Trump's move heralds an era of government intervention in private enterprise - especially as the transaction occurred shortly after Trump demanded the CEO of this chip manufacturer resign. The agreement announced last Friday will convert $11 billion in "Chip Act" appropriations and other government funds into a 9.9% stake in Intel Corporation (INTC.US). The company's press release about the transaction included statements of praise from CEOs of companies such as Microsoft Corporation, Dell Technologies, Inc. Class C, and others. Investors have expressed concerns that this level of "compliance" is not typically seen in the relationship between companies and Washington. Trump has previously stated on social media that Intel Corporation's CEO hoped to keep his position, ultimately "contributing $10 billion to America". "If the President can threaten the CEO to take over 10% of the company's shares, it will set a dangerous precedent," said James McCrith, a California private investor and shareholder rights activist holding Intel Corporation shares. He expressed that the statement actually conveys the message: "We love Trump, and we don't want 10% of the company's shares to be taken away." On August 6th (the day before Trump demanded the resignation of the CEO), Intel Corporation closed at $20.41, then rose and closed at $24.56 on August 15th (the last trading day before Trump's terms were disclosed). On Tuesday, the stock dropped 1% to $24.35. According to securities filings, the transaction does not grant the US Department of Commerce a seat on the board of directors, but it requires the Department to support the board in director nominations and proposals. However, the Department of Commerce may vote "at will" on certain other matters. Fitch Ratings stated that the transaction does not help improve Intel Corporation's slightly above junk-rated BBB credit rating. The agency pointed out in a research report on Tuesday that while this move provides more liquidity, it does not fundamentally boost demand for Intel Corporation's chips. Voting rights diluted Intel Corporation's filings also indicate that the transaction will dilute existing shareholder equity, reduce their voting rights, and may subject the company to additional regulatory or restrictions in other countries. More importantly, CEO Chen Liwu has explicitly stated that Intel Corporation does not lack money - just three days before Trump's announcement, SoftBank had invested $2 billion in this chip manufacturer. This marks the latest extraordinary intervention by the Trump White House in private enterprise: following the announcement in July of acquiring shares in mining companies through military agreements, and influencing Japan's Nippon Steel's acquisition of United States Steel Corporation. US Commerce Secretary Howard Lutnick said on Tuesday that the Trump administration may also invest in defense contractors. However, while such actions are seen as unconventional in the US, they are common in many Eurasian countries where governments already hold large stakes in major corporations. For example, Lower Saxony in Germany holds a 20% stake in Volkswagen. "In Italy and France, they have implemented a lot of industrial policies around the semiconductor industry... this has been the case since the importance of semiconductors was recognized forty or fifty years ago." During the 2008-2009 financial crisis, Washington also rescued several endangered important companies through equity investments, but those arrangements were temporary in nature. Pressuring healthy companies to obtain long-term equity ownership is unprecedented and some investors are wary. Blurry boundaries Rich Weiss, Senior Vice President and Chief Investment Officer of American Century Investments' Multi-Asset Strategies, stated that future federal investments "will need regulations and guidelines to limit abuses such as insider trading." "Without constraints on direct government investment, trading in the stocks of these companies may pose significantly increased risks for investors." Multiple investors and representatives mentioned similar risks, such as conflicts of interest that companies may face when boards weigh decisions on new factory locations, layoff decisions, or the extent of market expansion. "When it comes to these matters, the goals of the company and the goals of the nation can easily come into conflict," said Robert McKomic, Director of the Institutional Investor Council, which includes large shareholders like state pension funds. "Government owning shares of private entities can create conflicts between corporate interests and national interests." Kristin Hoel, Chief Investment Officer of California shareholder advocacy firm Nia Impact Capital, expressed more doubts than confidence in this equity transaction. Nia manages Intel Corporation stocks for clients, and its fund also holds shares in other chip manufacturers such as Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR and AMD. "I think the boundary between government and the private sector is becoming increasingly blurred," she stated in an interview. A representative for Intel Corporation stated that the company's board had approved the issuance of shares in the transaction, but did not provide further comment. When asked about concerns about insider trading, the representative cited the press release stating that the US government "does not have board representation or other governance rights or informational rights". Microsoft Corp. representatives declined to comment, while Dell Technologies, Inc. Class C representatives did not respond to inquiries. An anonymous large institutional investor stated that the transaction could protect Intel Corporation from pressure from activist investors. However, the individual warned that if the US government continues to acquire stakes in other companies, it could be a worrying step towards state capitalism. "Seeing a case like Intel Corporation's happen once will raise eyebrows rather than set off alarms. But if this tool is widely used, we must examine the reasons for its use and why the capital markets cannot provide financing."