US Takes Nearly 10% Stake in Intel, Clinching Unorthodox Deal

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2:00You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Business Week Daily. Reporting from the magazine that helps global leaders stay ahead. with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Masser and Tim Stenevek on Bloomberg Radio. Remember this number, 433 ,323 ,000. that's how many shares of common stock it represents 9.9 of the fully diluted common shares in intel that the government will receive because of 8.87 billion dollars in funding under the chips and sciences act this according to people familiar with the terms of the deal what we're talking about is the u.s taking a close to 10 stake in intel clinching an unorthodox deal we've got with us joe doe he covers economic statecraft for bloomberg news he joins us here in the Bloomberg Interactive Brokers Studio.

3:21So we knew about the possibility of a deal for more than the last week, thanks to the reporting by you and the entire team at Bloomberg News, who's been all over this story. What are the details that we've just now learned? Because it's official. Yeah, it's official. I mean, people familiar with the terms have said it's this nearly 10 % stake. It's a 9.9 % stake at, what is it? $8.9 billion. dollars so um what that tells us is they they're doing what uh howard lutnik earlier this week confirmed from our reporting last week and the president today said hey it's a 10 stake but like um we point out in our story one of the things that analysts and experts around intel say is like an equity stake on its own like doesn't do a lot to move the needle for the company you need customers you need partners um i i think that's really where this the interesting part of the story is to me and i'm curious you know how influential is this of course we know that this is a non-voting stake that they're going to be having how big of an influence would this be toward the company so i i think you know this is kind of just talking to people around this space right is like well suddenly if you're a company with the government uh having a stake in your company the questions you ask if you don't have them on as a board member is like one person said you got to start getting used to having elizabeth warren calling you every day and i think that kind of encapsulates like like where you now have the united states federal government as a partner as an equity partner as a stakeholder that means donald trump can at any point just speak off the cuff about your company whether good or bad uh and you're just gonna have a like there's there's going to be you're gonna be a target there's gonna be some return that you want right and and i think that is both uh maybe a problem but also one of the things we point out in our story like it could be good that the that intel has the the thumb of the president kind of over them to try and move ahead.

5:33Maybe. Maybe. Who knows? This is a new era for capitalism in the U.S., as you've spoken about. Joe, I wanted to ask about the structure of this and the relationship with Chips and Sciences Act money. The president has been outspoken regarding the disdain that he has for the Chips and Sciences Act, which, of course, was approved by Congress and signed into law by President I'm sorry, by President Biden. Yeah. Last president. Is the remaining Chips and Sciences Fund Act money that Intel was supposed to be awarded? Is that what represents the stake? Yeah. I think most of that. So no new money is coming from the U.S.

6:14government to Intel? As we understand it, I mean, the details were that it's the remaining money that they had been promised for the CHIPS Act and it was in the form of grants is now going to be converted to an equity stake. And I think you're asking the right question, which is, well, you still need capital, right? Like they have this massive plant that they have in Ohio that they have been building. And a significant amount of that money that was in grants was being put towards the building in this facility. And as one person said to me earlier this week was, okay, great. So you take an equity stake.

6:51Where's the other money going to come from? If you do want this company growing, that means they're going to have to be building and they're going to need the capital to do that. So that, I mean, I don't know. Like, we can't really speculate, right? Like, what we know now is the equity stake is happening. And beyond that, there's really not a lot of detail. Like, you know, what does the president want? You know, what is... He wants skin in the... It sounds like he wants skin in the game. Yeah. And what else? I mean, the point is, you see them as a bit of a national champion. And you see them as central to national security for the United States of America, central to economic prosperity, all these things.

7:32Right. But like the point of the game, once you get there, is like catapulting this company ahead. It's lagged behind competitors for years now. I mean, Matt Boyle, you're going to hear later, he and I were talking about this earlier. Like when's when's the last time the average person was actually talking about Intel? This is a company that has fallen behind competitors and it does need partners to help lift it up. So, well, Intel's not the only U.S.-based chip manufacturer. It is the only U.S. headquarter company with a leading edge in terms of manufacturing. So how does this kind of all come into play?

8:08How is this integral for the administration's mission to keep manufacturing here in the United States? Yeah, I think, you know, listen, Donald Trump is a big fan of the industrial economy, right? He manufacturing has been at the top of his list since the first term. I mean, all he did was talk about steel and steel tariffs during his campaign in 2016. I think he believes one on the one hand, yes, let's boost the domestic capacity for production of chips here. but he also understands, you know, this chip manufacturer in particular is important for the AI battle that's going on. You do need Intel with NVIDIA and AMD.

8:50They can't just disappear. I mean, you can talk to anybody in this space and say, is Intel too big to fail? And every single one of them says yes. Joe Doe, you've been so generous with your time. The reporting from you and the team has been fantastic. Have a great weekend. You too. Maybe we will not see you in the next 30 minutes. We never know. Joe Doe, he's a Bloomberg News economic statecraft reporter. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

9:20What if data didn't sit still? What if intelligence moved with us? Not buried in reports, but activated in real time. Where lives are being shaped. Where decisions are being made. It all starts with a question. Where is the potential? Coatality turns data into clarity. Intelligence into insight. Insight into action. Because when intelligence moves, we all move forward. Coatality. Intelligence beyond bounds. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening, as the days of stumbling across a cheap seat on a popular flight could soon disappear.

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12:24Stocks surging after the Fed chair struck a more dovish tone than many expect during his highly anticipated final speech at Jackson Hole. The venture covered a lot in there, during which treasuries rallied and the dollar tumbled too. He addressed the dual mandate, the effect of tariffs, and emphasized the committee's, quote, data-driven approach. While the labor market appears to be in balance, it is a curious kind of balance. This unusual situation suggests that downside risks to employment are rising. At the same time, GDP growth has slowed notably. The effects of tariffs on consumer prices are now clearly visible.

12:58We expect those effects to accumulate over coming months with high uncertainty. A reasonable base case is that the effects will be relatively short-lived. It's also possible, however, that the upward pressure on prices from tariffs could spur a more lasting inflation dynamic. The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. FOMC members will make these decisions based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. we will never deviate from that approach. That's Edger, Jay Powell in Jackson Hole earlier today.

13:35I want to bring in Michael McKee, international economics and policy correspondent for Bloomberg TV and radio. He's on the ground in Jackson, Wyoming. Also with us here in the Bloomberg Interactive Brokers Studio is Stuart Paul. He's US and Canada economist for Bloomberg Economics. Mike, I want to start with you. As I mentioned, he covered a lot of ground and certainly we're seeing traders happy with what they heard. But beyond the idea of a potential rate cut in September, apart from that, what was the biggest news, your biggest takeaway from this final Jackson Hole speech?

14:09I think anybody on Wall Street, it's hard to get beyond that. The next thing he did was outline the new framework, which may be reassuring to people because they basically abandoned the idea of making the labor market the primary determinant of what their monetary policy is going to be. That was the old framework. They hadn't actually followed that since we saw the pandemic disrupt everybody's economy, including the inflation levels. So that was the second biggest thing for him there. But the surprise was certainly that he was as dovish as he was and opened the door to a rate cut because most people coming into this, including the Fed folks that I talked to, thought he would try to keep his options open because we don't know what's going to happen with the unemployment report coming up on September 15th and the CPI report on September 11th.

15:02Did he give you any insight in that speech as to the evidence that he cited as to why he does have that door open for a 25 basis point rate cut in September?

15:16Basically, he addressed the tension between the two sides of the Fed's mandate on the employment side. What he was saying is that because we are concerned about whether companies are going to have to absorb a lot of tariff hit and because companies are nervous about the overall economy, we could see unemployment start to rise. He called it a kind of unusual situation where you have a lot of companies have stopped hiring, but you also have companies not firing people and they might be poised to fire people. That could happen fairly rapidly. and the Fed wants to get ahead of that. At the same time, they have to worry about inflation.

15:55But because the president has stretched out the application of tariffs, because they're different for so many different countries, because more are yet to come, it is likely that the tariffs will hit individual sectors at different time periods. And they will be sort of rolling across the economy. But each one will be a one-time price increase, as Chris Waller, the Fed governor, suggested would happen. And so they will have more time to react to inflation than they might to the jobs numbers. And that's why they're now looking at the labor market as perhaps the trigger to this rate cut in September.

16:35I also wanted to talk to Stuart, bring you into this conversation here. Of course, we now know that a lot of traders are pricing in the September rate cut next month. And of course, it's a conversation about whether it's going to be a hawkish or dovish cut here. but how are you thinking about the economy during this time period and how aggressive potentially the rate cut cadence could be moving forward? I think that the rate cut cadence is going to be actually relatively slow. I think that we're going to see something more along the lines of a hawkish cut if we get one in September. There's still a lot of data that we need to see before then.

17:07As Mike was saying, a lot of the members of the FOMC that he's been talking to in Jackson Hole, people like Susan Collins from Boston, people like Austin Goolsbee, people like Beth Hammock from Cleveland. They've all been actually a little bit more hawkish regarding the current economic landscape than we heard from Chairman Powell today. Now, Chairman Powell did acknowledge that the labor market is becoming a bit more of a concern than the inflation outlook. But he also pointed to the point that growth has merely slowed. It's not as though there's a certain amount of urgency right now that we need to see.

17:42And so I don't expect that we're going to get something like sequential cuts. I think we'll probably get a 25 basis point cut, if anything, in September. And maybe that's it for the year. Stuart, which part of the dual mandate do you think the Fed should be more concerned about right now? I think the labor market is by far. Do you think they are more concerned about that? I think that right now they are favoring the inflation side of the mandate. I would be a little bit more concerned about the labor market because, again, this Chairman Powell did note the pace of hiring over the last three months has slowed to an average pace of about 35 ,000 jobs added.

18:17That's down from about 168 ,000 jobs added last year. As Mike pointed to, if we start seeing even just incremental layoffs, the pace at which unemployment will accelerate is going to be pretty rapid. So, Stuart, of course, we know that Powell tends to really avoid anything that would represent him leaning toward commenting on fiscal policy. He only focuses particularly on the economic impact. I want to know here, how are we thinking about tariffs, though, in this situation and how it's affected the economy and how the Fed will really have to wiggle through and figure out how to address these concerns?

18:50Well, because we got the Canada news earlier today. And you're also a Canadian economist, too. Yes, very timely. Yeah. So from the U.S. perspective, we'll start there because we are thinking most about the Fed on this Friday. An average effective tariff rate of about 17 percent adds about one and a half percentage points to core inflation over the period, over about an 18 to 24 month period. And it also creates drag on growth, real drag of about two percentage points. And so from the U.S. perspective, it just amplifies the risk to both sides of the Fed's dual mandate. With unemployment low, that's allowed the Fed to remain on hold, favoring inflation for now.

19:33But again, labor market has the potential to cool. Canada, as we saw, has been suffering from the consequences of the trade war. That's really been amplified in the second quarter. and we're going to see just how much of a toll the trade war has taken on Canada next Friday when we get their Q2 GDP numbers. I expect to see a modest contraction. Now, Prime Minister Mark Carney announced that he'd be rolling back some of the retaliatory tariffs that Canada has imposed in response to U.S. tariffs on Canadian goods. The reality is, though, that the effective tariff rate on Canada is just about 7%. Canada has avoided most of the muscular tariffs imposed by President Trump.

20:18And unfortunately for Prime Minister Carney, the fact that he's willing to reduce some of his retaliatory tariffs isn't going to do much of the trick in the short run. Negotiations are going to continue well into 2026 with the USMCA renegotiation. All right. Gonna have to leave it there, guys. Thank you so much to both of you for joining us. Stuart Paul, U.S. and Canada economist for Bloomberg Economics here in the studio. Michael McKee on the ground in Jackson, Wyoming. He's international economics and policy correspondent for Bloomberg TV and radio. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

20:59This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening, as the days of stumbling across a cheap seat on a popular flight could soon disappear. Bloomberg's Juan Ha reports that airlines from Delta to Virgin Atlantic are adopting artificial intelligence to change seat prices more quickly by weighing dozens of variables in real time, helping capture more revenue while shrinking pricing gaps that once allowed travelers to find bargain fares. Machine learning models can more accurately forecast demand by analyzing historical booking patterns, seat inventory, and seasonal trends, while also continuously tracking competitors' fares and capacity changes to update prices in near real time.

21:47The technology could lead to higher fares on busy routes as airlines pack flights closer to capacity, but may also result in lower fares on off-peak and lower-demand routes. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com today by selecting Work Mode. Available on Plus and Pro Plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same. The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals.

22:26Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. Amazon Health AI presents Painful Thoughts. I, um, I can't stop scratching my downtown. Yeah, but I'm not itching to go downtown and tell a receptionist I'm here to talk about my downtown. some things you'd rather type than say out loud. There's no question too embarrassing for Amazon Health AI.

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23:53Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130. This, of course, is a day where we were really focused on the Federal Reserve at Jackson Hole in Wyoming today. We had the Fed chair, Jerome Powell, speaking today. And of course, it really did elevate markets in terms of how he essentially suggested that, you know, maybe there could be a future in which the rest of this year we could see, you know, traders were really pricing in a rate cut for September here.

24:27But we have the perfect person to break all of this down. And that's Emily Green, head of private wealth management at Ellevest. And we really want to chat with you a bit about what your view is on the market right now. How are you receiving this commentary from Jerome Powell? Yeah, no, I think it's really interesting because you saw earlier this week, the market had been thinking that we're going to have a rate cut in September. And then, you know, we saw a rougher market week with inflation data and people starting to think that maybe it was becoming more unlikely that that was going to happen.

25:01And Powell's comments really indicated that likely moving to a rate cut in September. You know, I think it's really interesting thinking about where the job market is in inflation and taking that into account that the Fed certainly doesn't have an easy path ahead of them and thinking about this and, you know, looking at what that means in terms of the economy. I think we're really lucky that we still have room to lower rates at this point when we think about where, you know, that we when we need stimulus into the economy, that the Fed actually has that tool that we had raised rates a couple of years ago to get to this point.

25:39Even though we're a point lower than we were a year ago, there's still the Fed still has a lot of room to do that work. Yeah. And I think one thing that we make sure isn't lost in the conversation today is about why the Fed could or would potentially lower rates. And, you know, that is not necessarily the reason that the president wants rates to be lower, the reason why he says rates should be lower. Can you talk a little bit about that tension with the dual mandate and what the Fed chair is seeing when it comes to some cracks starting to form? Yeah, I think it's really interesting. You're looking at a weaker job market out there.

26:14I think we started to see that. I personally started to see it with working with our clients and such, but we're starting to see a weaker job market. At the same time, you are starting to see some pressure in inflation. We started to see consumer data pricing in slightly higher prices. You're starting to see you're looking at annual inflation rate in July at 2.7 percent. You have to manage these two things across this. And so you really start to worry about those unemployment numbers. And you look at there's a slowing in both supply and demand for workers. So what does that mean for our labor market going forward?

26:49And the Fed really needs to think about that and really managing that. And so I don't think that they'll have more aggressive rate hikes or rate rate cuts that the president wants within here. I also think it's really important. Like one of the things that Powell did talk about is the Fed's independence. And one thing that that I don't think that the administration totally appreciates within here is that the Fed's independence is so important to where rates are within here. And as soon as it seems like we're losing that independence, you're going to have it doesn't matter if the Fed starts lowering rates.