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Investing.com -- The U.S. government’s equity investment in Intel (NASDAQ:INTC) provides fresh liquidity for the company’s manufacturing buildout, Wolfe Research analysts say, but warn that it doesn’t improve the return on those investments (ROI).
“Our view has been that the government equity investment provides liquidity for INTC’s manufacturing investments, but it won’t help the ROI of those investments,” Wolfe analyst Chris Caso said in a note.
Caso said they were encouraged by Intel’s management shift away from a “build it and they will come” strategy and toward requiring tangible returns before committing to new projects, including the company’s 14A manufacturing node.
However, he sees risks that the government stake could limit Intel’s flexibility by pressuring the company into projects that may not deliver adequate returns.
“Our concern with the government’s investment is that it would limit INTC’s flexibility, perhaps forcing them into investment that doesn’t provide an acceptable ROI, and INTC’s other investors would be forced to go along for the ride,” Caso said.
Following discussions with Intel, Wolfe Research said management emphasized that Washington has long been an influential stakeholder regardless of equity involvement. Still, the government’s stake now better aligns it with Intel’s success.
At the same time, Intel appears locked into pushing ahead with its 14A investment, with the scale depending on customer demand and the split of internal designs between Intel 14A and TSMC’s A14 process.
Fully outsourcing manufacturing, which Wolfe Research sees as the best outcome for shareholders, is no longer viewed as realistic.
Caso also flagged political factors. The 14A production timeline coincides with the 2028 U.S. election cycle, a development they believe could further constrain Intel’s options.
He added that the move supports semiconductor equipment companies such as ASML Holding (AS:ASML), since Intel is the first High-NA EUV customer.