US Intel
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The US government's investment in Intel has sparked a heated debate about the implications of state-backed capitalism, with some commenters questioning whether the government will truly care about Intel's business practices or just reap the benefits. Others point out that propping up a struggling company like Intel stifles competition and innovation, as it would be nearly impossible for a new domestic competitor to emerge with hundreds of billions of dollars in investment required to build a fab from scratch. As one commenter quipped, the real question is whether Intel plus the US government is more trustworthy than Intel alone, with some predicting a rocky road ahead regardless of who wins the next election. Amidst the uncertainty, a few voices argue that government involvement is a necessary trade-off for tax privileges and national security interests.
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If the last 8 Months of this year has shown something, it's that every decision the US takes could be considerate, but as likely also completely random and reversed and bent at any moment in the future.
Accepting those risks in order to sell in the US-market (assuming it would be required) requires that the US-market also provides the commercial rewards.
For now I don't see that this is secured in sufficient volume to justify such an investment, considering that it will take YEARS for Intel to actually become a viable foundry and have a customer product ready to be produced there. And I'm not even talking about the potential cost-increase vs. an established high-volume foundry...
This my main problem with this investment. I can certainly appreciate the benefit of US government investment to ensure "homegrown" production capabilities. However, this depends a lot on a level of understanding, intelligence, and planning from the US federal government which is monumentally lacking. If no one trusts Intel now, I cannot begin to imagine how anyone would view Intel plus the current US government as more trustworthy.
Just look at the current approach to tariffs as a good example for how current "industrial policy" is being carried out. Unpredictable, vengeful, and declared with little plan or forethought. Why should we expect any differently from other policies?
Because people making these decisions aren't chronically online....
... this ain't that, though. It's a one-off, not a reliable broadly-applicable policy, and it's not clear what kind of strategy it represents in the bigger picture. I also doubt the ownership structure is as hands-off as I'd prefer, though I admit I've not looked into the details (if there even are details yet—we've had a lot of reporting on things as if they've happened, that then sometimes go on to never actually happen, lately)
[EDIT] I further think it would be better than the status quo to acknowledge that we have an economy dominated by Zaibatsu now, and to use the government to leverage them for public benefit the way the "Asian Tigers" do/have, though I don't think this is that happening, either. I think we're currently picking the worst of three options, of "intentionally use them to their fullest; break them up; do nothing" (we've been on the "do nothing" track so far, having abandoned "break them up" in the '70s).
Everything can for now be put under the umbrella of "US semiconductor sovereignty", but actually making this happen involves much more strategic planning and investment from the government.
For example, I doubt that Intel has sufficient experience as a foundry to support design-finalization for ARM, they are JUST starting NOW with this.
So who will pay for closing such gaps? Would they force e.g. Apple to use Intel as foundry and swallow all the associated cost, or would they rather accept Apple to source from a TSMC fab (which is built in US for the big customers like Apple and nVidia)
What makes you say that?
At minimum he's made a never Trump - maga pivot for political expediency but it also seems like his positions are tied to whatever Peter thiel wants
Even setting aside most of the culture-war stuff, which is so white-hot right now that it clouds matters, I think almost any other politician other than Trump, AOC, MTG, and probably a couple more I'm forgetting, would be more likely to do that last thing.
Trump's main issue is that he gets all excited and makes rash decisions based on the last person he talked to, compounded by the fact that he chooses who to talk to overwhelmingly based on chump change "campaign contributions" (bribes), family nepotism, or just his existing network of sycophants.
I'm saying all this neutrally toward ideology and left/right. Frankly I think life was fine domestically under both G. W. Bush and Obama, because both of them weren't impulsive and easily swayed to erratic decisions.
This is recognized by the current administration but is also a continuation of the previous administration's pivot toward undergirding and supporting key industries. I hope it's also recognized by any subsequent administration.
I think even neocons now recognize the "new world order" is not sustainable if some players don't play by the rules that they all agreed on.
No country with an ability to avoid it wants to be subject to being held by the neck.
That was why they passed the chips act to direct this money to Intel. It has nothing to do with Trump forcing them to dilute shareholder value in order to get money that they had already been allotted by congress.
The difference with Intel vs the banks, is Intel has assets that take decade plus to procure (foundries), and not something easily replaceable.
I think the US messed up big time in terms of national defense by not having some Gov program that does semiconductor manufacturing owned 100% from the start by the DoD. Now we need to do some grey area purchase of a failing company.
Uh.. they've been GSEs since their founding. (12 U.S. Code § 1717)
"Yeah but in 2008 the government bought shares in th.." Doesn't matter. Still GSEs before that. "But they were privatiz.." Doesn't matter. Still GSEs after that.
Every time someone says "both sides are the same" a billionaire flooding media with 'both sides' messaging in order to distract from what is going on's taint twitches.
George W Bush (also a Republican) was POTUS in 2008 and it was his administration that oversaw the bank bailouts (the program continued under the Obama administration but was designed and implemented by the Bush admin) and the nationalization of Fannie and Freddie.
[1]: https://en.wikipedia.org/wiki/Nationalization
The republican game is to call democrats <insert_any_label_here> and then do the same thing they allege democrats do.
or is it just an alternative way of taxing capital? instead of taxing wealth and capital, just take an equity stake in it ?
Well it's complicated... Is China socialist? What about state capitalism in general?
If you wanted to tax capital via equity stakes, you'd simply have demanded a much larger stake.
What we're doing is starting down the road of "capitalism with Chinese characteristics". It's a tacit admission that the Chinese model can be effective at achieving a nation's strategic economic goals. (More effective than the model we previously championed.)
The real flip side in all of this is that everyone else sees what we're doing for what it is, and they also implement capitalism with Chinese characteristics. Which in and of itself wouldn't be bad. But what if nations like India or Indonesia turn out to be just flat out better than us at it?
Or, God forbid, the nightmare scenario, which would be nations like Brazil being better than us at it?
Most importantly, Intel's market cap is minuscule $100 bln, it doesnt allow control over meaningful amount of capital
Socialism with Chinese characteristics - it reduces private wealth and curbs control of oligarchs like Jack Ma. I feel like US is the opposite, where oligarchs directly control the government already
I didn't mean the intent is to control Intel's capital.
I meant controlling capital flows. In this particular case, controlling the flow of capital in a strategic sector out to TSMC et al. The idea is that regulation, state backed companies, etc etc all concert to oblige the market to keep those capital flows inside of your jurisdiction.
China does the same. It's extraordinarily difficult to exfiltrate capital from China. One of the only ways to do it is to turn the capital into products and exfiltrate those products out of China in place of the capital.
I think, long term, the US wants the same sort of environment over here.
Honestly this is pure horseshoe theory where Bernie Sanders and Trump hold the same views.
Holding significant stakes in domestic companies just seems like light state capitalism.
https://en.wikipedia.org/wiki/Public_Investment_Fund#List_of...
Very well argued. It's such a stunning dereliction the US let things get to this point. We were doing the "pivot to Asia" over a decade ago but no one thought to find TSMC on a map and ask whether Intel was driving itself into the dirt? "For want of a nail the kingdom was lost" but in this case the nail is like your entire metallurgical industry outsourced to the territory you plan on fighting over.
Financialization is a dead end when you face a nation state determined to control steps in you value chain. How profitable will apple be if they can’t get chips?
Intel switched to a "service the stockholders before the customers" mode and they have never recovered.
Gets you the entire datacenter market maybe. End user (PCs, cellphones etc) stuff is much more concerned about perf/$ (up front cost) than perf/watt (long term cost), and the embedded market (electronics, appliances etc) mostly care about 'good enough' as cheaply as possible - performance isn't a concern at all for many use cases.
And the corporate market mostly cares about (perceived) reliability/liability concerns over everything else - see how hard it's been for AMD cpus to penetrate despite being measurably better in every category compared to Intel at various points in time.
I'm sure it'll work out well for us...
Our system has no breaks for this. In fact it works actively for this, hence the neolib ideal of "just move towards efficiencies, and let the chips fall where they may." This is ideal under capitalism. As long as we avoid the needed migration to socialism, this is the best we can do.
Neolib economies generally work as much as anything "works" under capitalism. The GDP of the USA, median salary, quality of life, etc was the envy of the world until the recent nationalist movement that's based on "insourcing" and tariffs. You can't go back and capitalism migrates to efficiencies, which means outsourcing. Its more efficient to export factories and keep cushy office/service jobs here and drain the profits from those factories overseas.
Nationalism/protectionism and capitalism are fundamentally incompatible, so here we are. Demagogy and populism and "return to the past" mentalities used to win political power are the actual problem here.
Also what exactly happens if intel goes under? We have to buy 'foreign' licensed ARM? Manufacture in Asia? We're already doing that. And we have AMD which is a good, if not, superior product, regardless of manufacturing locale. We don't need local fabs the same way we don't need local factories for a lot of other things. You can't just depress wages with a wave of a hand nor do tariffs work outside of some really focused edge cases.
>The U.S. will be completely dependent on foreign companies
This is true of nearly all things in nearly all countries. Recent nationalist movements won't change how capitalism works and recent tariffs and protectionism has only hurt these industries and the working class. The toothpaste is out of the tube and it cannot be put back in. What we're seeing with the government buying intel is an attempt to do that, and it will fail. Expect more tomfoolery like this until we get responsible leadership, but until then we all have to sit here and watch these various economic horrors unfold. Be it this, inflation, mindless tariffs, etc. This will fail and its obvious it will, but currently it buys political power, so we will go this route because voters, largely uninformed on how capitalism works, think this is the "one weird trick" that will make them wealthy. It won't. In fact, all recent indicators are more negative as these policies continue. It will instead make them poor.
Current American culture can be pretty ugly.
Huh? France and Germany are prime counter examples of your statement.
Their benefits are almost purely from the strength of the working class, hence workers having it better there.
In France, the percentage of employees covered by a collective bargaining agreement, which is very high (around 95-98%)
In Germany, about 50% of workers are directly covered by collective bargaining agreements (CBAs)
In 2024, the union membership rate in the United States was 9.9%, representing 14.3 million workers, while 16.0 million workers were represented by a union under a collective agreement, accounting for 11.1% of the workforce.
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If American workers want a better life they need CBA's and unions, not protectionist tariffs and buying chunks of random tech companies.
This is the same short sighted nonsense that got us into this mess. What happens if China invades Taiwan tomorrow? They can cut off the supply of chips to most of the world and global economies will collapse overnight. You really haven't thought through the implications of having critical dependence on a single small island that a global power is incredibly invested in controlling.
It sucks for a while; the system is strong and adapts.
I appreciate fabs are multi-year, massive capital investments, but TSMC already has one up and running in Arizona. There are others (including owned by Intel) all around the world. They won’t go poof when INTC is no more.
It can mean outsourcing, but I think your broader point is undercut by the fact that the USD holds a very special place as the world reserve currency. This creates high foreign demand for the USD which pushes up the exchange rate and leads to US exports being less competitive on the international market (i.e. our manufacturing base gets hollowed out because it cannot compete). This is a large market distortion that the US actively defends because it benefits us in other ways. Tariffs and general protectionism is not a good thing in a free market, but that's not really what is happening at the international level.
From this lens, the silver lining of the software layoffs going on may be to stem the bleeding of semiconductor workers to the field. If Intel were really smart, they’d be hiring more right now the people they couldn’t get or retain 3-5 years ago
They literally cannot have a culture that encourages the now-traditional job hopping that is so pervasive in American business culture. They can't afford it.
This isn't SW. Those ratios don't exist in the HW world.
(And to be frank, it's a myth in SW too).
But the real trick is filtering precisely the 50% you want.
Contrast this with biotech venture capital which has been doing well for decades, often investing more capital in a year than software VCs. The difference is that all the research, clinical trial, and manufacturing expertise is already here and concentrated in a few localities like South San Francisco, San Diego, and Boston.
I think that's why most people just aren't that upset about tariffs. It would be nice to be able to participate in our own economy other than by grifting off real estate or software.
To fund a similar sized hardware start-up you need a full lab andddd already the proposition is dead.
And engineering teams usually scale up with revenue as well.
I feel like your numbers are the myth that gets told not what actually often happens
Exactly. Margins are dropping rapidly: https://ethanding.substack.com/p/openai-burns-the-boats
- The chatbot people have a personal attachment to
- The processing tool.
In the second, you only care about the result. Something like Claude Code can call any other provider if that's cheaper and visa-verse. Once I have the result, my dependency / lock-in is no more than a brand of toilet paper. The providers will have to do the 'capitalism thing' and compete.
It's almost like WeWork's, valuated at IT levels by being in the style, only for investors to eventually figure out the marginal production costs are not reducible to near 0, and you can't just bully out competition / network-effect to get a monopoly.
And this applies to any company that wraps and re-sells AI.
Something the tech-VC world is so unfamiliar with, it's scrambling to present the truth of what is 'econ-101' for the rest of the world.
Agriculture is much slower, every iteration may be is a year, or (in tropical climates) half a year. Microelectronics is comparably slow, and even more unforgiving about making mistakes. Building robots does not scale ls easily as producing chips, let alone software.
These areas need a different model of investment, with a longer horizon, slower growth, less influence of fads, better understanding of fundamentals. In some areas, DARPA provided such investment, with a good rate of success.
What VC capital is not interested in is regular fuel, which can burn steadily and expand gradually, without a shock wave. Such companies can be quite important. Say, GitHub was such a company for many years, before it took a large VC investment and got acquired MS. Investing in such companies requires much more diligence and foresight, maybe too much predictive power to work at mass scale.
VCs' math only works because a single 1000x hit easily pays for a hundred of duds. If ROI per hit is 2-3x, and research required is 10x more deep, the prospects likely start to seem too bleak for folks with billions seeking return.
I especially dislike the way VC funded startups use VC dollars to effectively be a “loss leaders” for years to choke out the rest of the market.
Who wants to risk their own capital or privately pooled funds against THAT?
Show them your finances and collateral to demonstrate that you'll be able to pay off the loan.
>I especially dislike the way VC funded startups use VC dollars to effectively be a “loss leaders” for years to choke out the rest of the market.
It's a fair point, but it's a point which does not apply to the industries we are discussing, which do not receive VC investment.
I actually really like your point about Masayoshi Son-style investments which are just an attempt to entrench a monopoly. I'm no socialist, but if socialists called for identifying and taxing such investments, I wouldn't object. The trick is to distinguish between the WeWorks of the world, and the Boom Supersonic type companies which genuinely need gobs of capital for breakthrough innovation.
Just heard of Palmer Luckey. Hmm! Money? No big staff, not much equipment, essentially just one person?? $1B+, quickly? Example: Taylor Swift. Did she ever hear of Linux???
Leaving behind only those completely focused on returns.
When turning the spotlight to capital that is seeking returns, it is true that these areas may be mediocre places to deploy fresh capital, but it doesn't mean that these players aren't competing, and they will probably be cranking out sheet metal and port cargo logistics optimization well after 90% of the AI startups fold.
The caveat is of course Private Equity, which is about 10 trillion in assets. They can derive high returns from these areas, but it requires leverage.
PE is arguably much worse than VC. VC's business model is well understood and by taking VC funding, you are committing to their expected returns.
PE is, usually, unsolicited and is designed to exploit what appears to be a "lazy" balance sheet, but which is actually a stable business producing output and providing a reasonable ROI.
PE has very few redeeming features.
Think of PE as the decomposers of capitalism, and VC as its seeds. Most people don't like to think of it that way because they don't like to be reminded that death is a part of life. But if you view capitalism as a living ecosystem and your role within capitalism as someone to accelerate growth and then accelerate death so that new growth can take its place, it all makes sense. And you can probably profit pretty handsomely from it, because most people don't view capitalism like that and instead seek stability in the dying parts.
In the US there have been a few, i.e., apparently less than 20, universities with an applied math program up to date in and teaching optimization.
Sooooo, anyone at all seriously interested, long, for decades, would, could, should visit some of those math programs, meet some of the profs, get recommendations for their former students, call them, chat, and offer a job better than their current lawn mowing, fast food restaurant kitchen cleaning, or car washing. Instead of just the US, might also consider Waterloo in Canada. Actually the Chair of my Ph.D. orals committee specialized in optimization in logistics. After sending 1000+ beautifully written resume copies and hearing back nothing, can begin to conclude that optimization is not a hot field and for highly dedicated optimizers who want to sleep on a cot in a single room, forgo bathing, most days eat bread, other days peanut butter, have no children, wife, or family contact, don't own a car, and must get any needed medical care from some of the last resort special clinics. Ah, real optimization!
It is still unsettling seeing Uber turning a profit, but even with that they're not turning a net profit over the lifetime of the company yet and won't be for a few years. Hopefully no-one pops up to compete with them now the sector has profits in it.
That said, allowing VC into 401ks and such I would agree is an abominable idea, because this stuff isn't marked properly until it is in distress. Actually, that area could use better regulation. Volatility laundering is already a systemic risk. Many of these vehicles have creative ways to not mark to their market value, which makes pension fund managers and leered participants happy because it greatly improves the perceived risk metrics and performance, at the equal expense of cloaked fragility.
But perhaps just let them have a thunderdome, and if they want to breach the walls and enter areas like retirement funds where society agrees standard are higher, there is a strong set of filters/regulations that must be adhered to.
They don't know anything else.
https://www.currentmarketvaluation.com/models/s&p500-mean-re...
This YCW18 ag company was acquired less than 3 years in by John Deere for $250M: https://techcrunch.com/2021/08/05/john-deere-buys-autonomous...
I feel like anything relevantly practical is denied investment.
But when it comes to anything flashy and hip, a train of dump trucks filled with cash couldn’t deliver money as quick as the VC dollars that flow into to startups with no business model and no hope of being profitable…
Yeah, I get that startups should invest profits and not actually make profits for a while… But when they’re on their 4th round of funding with thousands of employees… shouldn’t they at least try to be a bit more financially responsible?
If you have money, the returns you'll get elsewhere are much less attractive, and can only be justified if they're very safe investments.
(Also, in neither country is the majority of its GDP comprised of websites.)
Is that the particular one you're referring to?
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