Good morning. What just happened? Only 15 days after President Trump posted that Intel CEO Lip-Bu Tan “is highly CONFLICTED and must resign,” the two men had seemingly become best buds, and the U.S. sent Intel $8.9 billion in return for a 9.9% stake in the company. Then, yesterday, National Economic Council Director Kevin Hassett told CNBC, “I’m sure that at some point there’ll be more transactions, if not in this industry, in other industries.” He likened the deal to a “down payment on a sovereign wealth fund.”
But why? Why now? What’s next?
For answers, I spoke with three experts on government investments in companies. Three themes came through—though answers were harder to find.
This deal is like none other. “It is entirely unusual, if not unprecedented, for the United States government to take a significant ownership stake in a major company in the United States, particularly one in a strategic industry,” says Douglas Rediker, a lawyer and economist with long experience in global finance, sovereign wealth funds, global capital flows, and their impact on foreign policy. Luigi Zingales, a professor at the University of Chicago business school, says, “The thing that, to me, is shocking and unbelievable is that it starts as an attack to the CEO based completely on his potential self-dealing—which might be true, might not be true—but if that’s the problem, it cannot be solved by giving some stock to the U.S. government.”
The deal’s objective is far from clear. William Megginson, a professor at the University of Oklahoma business school, has researched the privatization of state-owned enterprises and sovereign wealth funds. He notes that the $8.9 billion paid to Intel is an advance of money earmarked for Intel in the Chips Act, so “the government is not bringing any new capital.” But then “what is the government bringing if it’s not bringing capital to catch up with Taiwan Semiconductor, which is probably going to invest something like $40 billion just this year—three or four times what Intel can spend?” Zingales says, “That is the biggest problem. If you have an objective, you can say it is right or wrong, feasible or not feasible. But without a clear objective, it’s kind of a mess.”
Intel’s competitors won’t like this deal, and they can’t know what to expect. “Are we now in an era in which the U.S. government is literally picking national champions, and if so, what does that say to other companies?” Rediker asks. “Does that mean Intel will now be given preferential treatment in, for example, government contracts? if you’re Intel’s competitors, you might be scratching your head and saying, Maybe we want to go in a different direction if we’re going to be compromised or disadvantaged because Intel is now the favorite son of the industry.”
If you’re a CEO, have worked for Intel in the past (or compete with them), I’d be particularly curious to hear your thoughts on the state of affairs. You can email me directly at Geoff.Colvin@fortune.com.
Top news
President Trump fires Fed Governor
President Donald Trump announced via Truth Social Monday night that he is firing Fed Governor Lisa Cook after she was accused of taking out two home loans in which she attested that both were her primary residence. Cook has not been accused of wrongdoing in any formal legal process. The move casts doubt over the Fed’s independence as Trump-appointed Fed governors would represent a majority on the Fed board if Trump appoints a replacement. Cook says she will not leave her post, setting up a legal conflict over whether the president has a right to remove a governor “for cause.” The NYT has a useful bio describing Cook’s career as an economist.
Wall Street is aghast
What they’re saying today: “This is an extraordinary act of aggression that violates the Fed’s independence,” Eswar Prasad, a professor at Cornell University, told the FT. “Trump has now declared open war on the US institutional framework, which underpins the dollar’s dominance in global finance.” … “This is unprecedented,” Lev Menand, a Columbia Law School professor said. “If this removal sticks . . . it spells something close to the end of central bank independence in the U.S.” … “It’s an authoritarian power grab that blatantly violates the Federal Reserve Act, and must be overturned in court,” said Sen. Elizabeth Warren (D-Mass.).
“They have to give us magnets”
President Trump has hit a wrinkle in his trade negotiations with China: China controls 90% of the supply of rare earth minerals that are crucial for electronics and military equipment that depend on high-powered magnets. “They have to give us magnets, if they don’t give us magnets, then we have to charge them 200% tariffs or something,” Trump said yesterday. The Economist has a good article about China’s export strategy here. The bottom line: China has what the U.S. needs and thus holds a strong hand in the tariff talks.
Canada and German pledge cooperation on mineral supply
Unsurprisingly, the E.U. and Canada are maneuvering around the U.S. and developing trade ties to increase the supply of minerals without involving the U.S. “For too long, Canada’s vast reserves of nickel, cobalt, and other critical minerals have been underdeveloped, allowing Russia and China to dominate the global market,” Canadian Prime Minister Mark Carney said yesterday. “Canada is ready to be a reliable supplier for our allies — particularly Germany as Europe’s largest economy and Canada’s largest trading partner in the European Union.”
Postal services, parcel shippers drop deliveries to the U.S.
The “de minimis” exemption to Trump’s tariffs (which allows small businesses and individuals to send parcels to the U.S. worth less than $800 tariff-free) comes to an end this week and at least 19 countries in Europe are pausing or dropping service to the U.S. as a result. Asian services are following suit, Axios reports.
Tesla rejected $60 million deal before losing $243 million case
Tesla rejected the opportunity to settle a lawsuit over a fatal crash involving Tesla Autopilot for $60 million, before losing a jury verdict that awarded $243 million in damages against the company. The verdict, if upheld on appeal, threatens to impose massive, long-term liabilities on Tesla in car crashes involving the company’s driver assistance software. Tesla said it would appeal.
CBO: Tariffs will cut $4 trillion from federal deficit
The Congressional Budget Office believes that the Trump Administration’s tariffs will cut federal deficits by $4 trillion over the next decade. In June, the nonpartisan agency put savings at just $4 billion.
Coinbase CEO’s AI mandate
In a recent appearance on the Cheeky Pint podcast with Stripe cofounder and president John Collison, Coinbase CEO Brian Armstrong noted that he mandated every engineer at the company to use AI coding assistants within a week’s time and fired those without a good reason for ignoring the mandate. “Even as CEO, by the way, I use it a lot,” Armstrong also said.
More Epstein documents subpoenaed
The House Oversight Committee has demanded documents from Jeffrey Epstein’s estate in hopes of discovering more about the “birthday book” given to Epstein that reportedly contained a warm message from Trump to his former friend. (Trump denies he wrote it.) The DOJ has already delivered thousands of pages that it held on Epstein. Here’s a list of likely names inside the book.
The markets
S&P 500 futures were down 0.13% this morning, premarket, after the index closed down 0.43% yesterday. STOXX Europe 600 was down 0.71% in early trading. The U.K.’s FTSE 100 was down 0.52% in early trading. Japan’s Nikkei 225 was down 0.97%. China’s CSI 300 was down 0.37%. The South Korea KOSPI was down 0.95%. India’s Nifty 50 was up 0.72% before the end of the session. Bitcoin fell to $110.2K.
Around the watercooler
Millions of Gen Zers are jobless—and unemployment is mainly affecting men by Emma Burleigh
New Zealand has the best work-life balance in the world—here’s what works by Jessica Coacci
You won’t get more money from quitting in this economy, BofA says, as job-hopping freezes in white-collar America by Nick Lichtenberg
CEO Daily is compiled and edited by Joey Abrams and Jim Edwards.
