Intel Loses $2.5 Billion Pentagon Grant

A new report suggests the Pentagon is pulling out of a massive grant for Intel, leaving the Commerce Department holding the bag

BREAKING NEWS

Intel stock got rocked this morning after Bloomberg reported that the Pentagon is bailing on a $2.5 billion grant for the chipmaker. What gives? 

WHAT HAPPENED

Intel has been rising thanks to chip optimism buffeted by an incoming $3.5 billion grant from the U.S. government. Biden’s CHIPS act has been dumping investment on manufacturers like Intel in order to boost U.S. dominance in the semiconductor industry. $2.5 billion of Intel’s CHIPS money was supposed to come from the military—making Intel a key provider of semiconductors for the Pentagon moving forward. According to a Bloomberg report, the Pentagon is pulling out of their end of the deal. That’s not good. 

BAG HOLDER

The U.S. Commerce Department now has to come up with that $2.5 billion in order to satisfy the grant. Analysts figure this puts that number in jeopardy—as the government can also re-allocate that Pentagon grant to other chip players. This could balloon into a big blow to Intel right at the moment where they’re about to launch a new manufacturing process that could allow them to leapfrog TSMC’s semiconductor dominance. The timing here is brutal.

WHY IT MATTERS

We’re at a key moment in the AI revolution where manufacturers are churning through oceans of cash to build better chipmaking systems. Major players are rushing full speed toward catching up to TSMC’s irrefutable dominance. Intel is a major player in that competitive landscape—and any stumbling block like this could cause them to fall further behind. This report spooked the market enough to drop Intel’s stock over 1% in early trading.