Key Points in This Article:
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President Trump called for Intel‘s (INTC) CEO resignation, citing a “conflict of interest” over his relationship to companies with ties to China’s military.
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INTC reportedly secured a contract for Tesla’s Dojo supercomputer packaging, boosting its foundry business.
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Political pressure from Trump may pose a significant challenge, raising questions about selling INTC stock.
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Political Meddling Overshadows Strategic Win
Intel (NASDAQ:INTC) stock is down 2.2% in morning trading today after President Trump publicly called for CEO Lip-Bu Tan’s resignation, citing a “conflict of interest.” His statement appears to refer to Tan’s extensive connections to companies allegedly linked to China’s People’s Liberation Army.
Just two days ago, Republican Sen. Tom Cotton sent a letter to Intel’s board chairman Frank Yeary complaining about Tan controlling dozens of Chinese companies and having a stake in hundreds of others with advanced manufacturing and chip production capabilities. He highlighted Tan’s role at Cadence Design Systems (NASDAQ:CDNS), which recently pleaded guilty to selling its products without a license to a Chinese military university and transferring its technology to a Chinese semiconductor company.
The significant political pressure has rattled investors, amplifying uncertainty around Intel’s already struggling foundry business.
However, Intel reportedly secured a significant win today, with sites noting it secured a contract to provide packaging services for Tesla’s (NASDAQ:TSLA) Dojo supercomputer, a move that would bolster its foundry ambitions.
Still, despite this positive development, the question looms: does Trump’s targeting of Tan create an insurmountable headwind for Intel? Should investors sell their stock in the face of such political turbulence, or do recent strategic gains suggest a potential turnaround?
Trump’s Critique and Its Implications
Trump’s call for Tan’s resignation stems from concerns over his global affiliations, which have raised eyebrows in an administration pushing for domestic chipmaking dominance. This criticism aligns with broader geopolitical efforts to reduce reliance on foreign semiconductors.
Trump’s remarks, while vague, signal a desire for Intel to align more closely with U.S. policy goals, potentially pressuring Tan to prioritize national interests over global partnerships.
A Turnaround Effort in Progress
Tan, who became Intel’s CEO in March, inherited a company losing market share to Advanced Micro Devices (NASDAQ:AMD) and a foundry business bleeding cash — $7 billion in operating losses on $18.9 billion in revenue last year.
Tan has pushed a bold restructuring, spinning off the foundry into a subsidiary to enhance financial transparency and attract external customers. This strategic shift positions Intel to compete with Taiwan Semiconductor Manufacturing (NYSE:TSM) and Samsung by leveraging its 18A process technology, set for mass production in 2025, though the company is reportedly still facing challenges with ramping up yields.
Tan’s focus on securing confirmed customer commitments for the 14A process reflects a disciplined approach. Despite persistent losses and hefty $25 billion annual foundry investments, these moves signal progress.
However, Trump’s public attack could undermine Tan’s efforts, potentially destabilizing partnerships and investor trust, making it critical to assess whether these steps are enough to keep Intel on track.
A Strategic Victory
The Tesla deal, where Intel will handle packaging and testing for Dojo’s D1 chips using its Embedded Multi-Die Interconnect Bridge (EMIB) technology, is a coup. Tesla’s pivot from TSM’s congested production lines to Intel highlights the latter’s capacity to handle complex, large-scale chip packaging, potentially opening doors to other high-profile clients like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT).
These advances, while incremental, show progress. The Tesla contract highlights Intel’s foundry ambitions, but recent reports indicate that the 18A process is still facing yield and defect rate challenges compared to TSM. Tan’s focus on customer-driven development — evident in his insistence on confirmed commitments for the 14A process — suggests a disciplined approach to reversing Intel’s fortunes.
However, the foundry’s $25 billion annual investments and persistent losses remain a drag, and Trump’s public attack could erode investor confidence, disrupt partnerships, and complicate Tan’s turnaround efforts.
Key Takeaways
Trump’s targeting of Intel’s CEO introduces significant uncertainty, as political interference in corporate leadership can destabilize operations and investor sentiment. Regardless of Tan’s merits, such actions risk distorting market dynamics, effectively picking winners and losers rather than letting the market decide.
Given Intel’s strategic progress, investors should hold rather than sell, and wait for clearer outcomes. The turnaround will take time, but after years of ineffective leadership, Intel now has an executive who appears committed to making lasting, positive changes at the iconic U.S. chipmaker.
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