The U.S. Is Counting on Intel to Fuel Its AI Ambitions. Will It Work?

The last few months have been a whirlwind for Intel. As recently as July, its business was in a slump, struggling to make headway in the booming AI chip market that’s largely been dominated by Nvidia. Then, President Donald Trump cut a deal allowing the company to receive public grants earlier than expected in exchange for the U.S. government taking a 10 percent ownership stake — a historic move that drew significant attention.

Intel’s stock has shot up more than 90 percent since the deal was announced, and it reported higher-than-expected revenue (about $13.7 billion) at its Q3 earnings call, indicating that the American chipmaker may finally be climbing its way back into relevance.

The agreement is much bigger than Intel, though, potentially signaling a new era in which the lines between government and business blur, as politicians leverage private companies to advance geopolitical goals at all costs. But why focus on Intel specifically? And what might this mean for America’s larger AI strategy? Let’s dive in.

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What to Know About Intel

Intel has spent more than 30 years cementing its legacy as a game-changer within the semiconductor industry. The tech giant got its start in 1968 when American engineers Robert Noyce and Gordon Moore — founders of Fairchild Semiconductors and prominent figures in Silicon Valley — decided to form their own company centered on semiconductor memory. With funding from Arthur Rock, often considered the “father of modern venture capital,” Intel was able to get off the ground and running in just a couple of years. 

The combination of fresh capital and experienced leadership sparked Intel’s rapid ascent. In 1970, it transformed the semiconductor world with its 1103 dynamic random-access memory, which replaced core memory as the preferred memory device due to its lower cost and power usage. Intel would follow this up one year later with the first electronically programmable microprocessor called the 4004, officially establishing itself as a major tech player. 

More innovations and partnerships would propel Intel forward in the decades to come. Here are a few key moments:  

• 1981: IBM selects Intel’s 8088 to be the central processing unit in its mass-produced personal computers (PCs). 
• 1993: Intel introduces the Pentium processor, which is the company’s first chip for PCs that uses parallel processing. 
• 1998: Intel launches the first of its Xeon processors, which are designed to scale and meet the demands of “higher servers and workstations.” 
• 2005: Apple announced that it would equip its Macintosh PCs with Intel microprocessors, converting all Macs by 2007. 
• 2006: Intel released the first of its Core processors, delivering higher performance and reducing energy needs in desktop PCs and laptops for consumers and businesses. 

Intel’s Main Products and Services

Intel made a name for itself through its advancements in microprocessors, but the tech behemoth has since branched out to offer a range of products and services.  

Processors

Short for central processing units (CPUs), processors act as the brain of the computer, following instructions and performing calculations. Intel’s Core and Xeon lineages fall under this category, as well as its Atom processors. While Intel has gained recognition for supporting personal computers and workstations, its processors can also power more complex use cases like gaming, data centers and Internet-of-Things applications. 

Computer Systems and Devices

Computer systems refer holistically to the hardware and software that make computers run smoothly. In this case, Intel’s systems include gaming systems, graphics processing units, Wi-Fi systems and a suite of PCs that come in laptop, desktop and workstation setups. Intel has also enhanced its lineup with AI-powered PCs, which demonstrate low latency on smaller workloads while still executing more advanced tasks like image generation. 

AI Accelerators

AI accelerators are hardware — typically computer chips — specifically designed to speed up AI workflows by completing multiple calculations at the same time in a process known as parallel processing. The Gaudi 3 is Intel’s leading accelerator, and can support large language models, multimodal models and retrieval augmented generation. 

Field-Programmable Gate Arrays

Field-programmable gate arrays (FPGAs) are integrated circuits that end users can reprogram after manufacturing to fulfill any function. Intel has left its FPGA production to Altera, which is responsible for the Agilex lineup. However, Intel no longer controls the company after Silver Lake acquired majority ownership in April 2025. 

Edge-to-Cloud Solutions

Intel supports cloud platforms and edge applications with network adapters, controllers and intelligent fabric processors, among other components. Together, these different parts can work together to help scale data centers, high-performance computing clusters and extensive networks of edge IoT devices. 

Software Solutions

Intel provides developers with various resources like graphics performance analyzers, API toolkits and designs software for its FPGAs and other devices. And for those working on AI projects, Intel offers pre-trained models, libraries of sample code and open-source tools to accelerate model training and inference.

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How Did Intel Lose Its Edge in the Tech Sector?

Despite its massive growth in the early 2000s, Intel has steadily fallen behind the world’s leading semiconductor companies. So, what exactly is the reason for the tech titan’s slump? Simply put, the company failed to keep up with the times at several key moments. 

Underestimated the Mobile Device Market 

Intel’s troubles began back in the mid-2000s when it held off from designing chips for Apple’s iPhone, believing the product would fail. Then-CEO Paul Otellini turned Intel’s attention to the PC market instead, neglecting the company’s mobile and networking efforts. Of course, the iPhone would go on to become one of the most successful products of all time, paving the way for other mobile devices like the iPad — both of which took a toll on the PC market. 

This decision practically cut Intel out of the mobile phone game, resulting in a huge missed opportunity to diversify its portfolio and effectively compete with the incoming wave of smartphones in the 2010s.  

Failed to Capitalize on Extreme Ultraviolet Lithography

Extreme ultraviolet (EUV) lithography has made it possible to create even more powerful chips that have become essential to the advancement of artificial intelligence. The technique uses light beyond the visible spectrum to engrave finely detailed patterns into a light-sensitive material on a silicon wafer, designing a chip’s circuits. As a result, manufacturers can produce smaller chips with higher performance, increasing chips’ efficiency. 

Taiwan Semiconductor Manufacturing Company (TSMC), a key competitor of Intel, became the first semiconductor company to commercialize this technique for high-volume production back in 2019. Meanwhile, Intel didn’t begin using EUV lithography for high-volume commercial production until 2023, giving TSMC a huge head start that may be impossible to overcome. To pour salt on the wound, Intel had actually been working with EUV lithography as early as 2004, yet somehow never applied the technique to commercial mass-scale production.

Relied on Self-Manufacturing for Too Long

Intel has always prided itself on making its products in-house, but this approach hasn’t done the business any favors. For comparison, rival chipmaker Nvidia designs its chips, but it leaves the actual manufacturing to TSMC. In turn, TSMC doesn’t have to worry about product research and development, and it even uses Nvidia’s tools to refine its manufacturing processes. 

In the end, the numbers speak for themselves. When it comes to research and development costs for chipmakers in 2024, TSMC spent $6.36 billion, Advanced Micro Devices (AMD) spent $6.45 billion, Nvidia spent $12.91 billion and Intel spent $16.55 billion. While Intel burns through cash on R&D, its competitors have leveraged more cost-efficient ways to deliver results.  

But even if Intel has realized its error, it will be tough to pivot from this approach, thanks to the 2022 CHIPS and Science Act. Under this legislation, Intel was awarded $8 billion as an incentive to expand its U.S. infrastructure, which it must follow through on to receive the remaining payments. That said, staying on the Trump administration’s good side may be all the incentive Intel needs as it gets pulled into the tech arms race between the United States and China. 

Why Is Trump Putting His Chips on Intel? 

The decision to partner with Intel through the CHIPS Act may not make much sense in light of the company’s decades-long slide, but Trump has more pressing issues to worry about — namely America’s ongoing AI race with China. In fact, his AI plans for the U.S. depend on Intel’s success. 

Specialized AI chips are necessary to handle the complex calculations involved in training and running AI models. While U.S. tech titans have funneled billions into the infrastructure needed to develop more advanced models, China-based DeepSeek turned the tables with a competitive model created at a fraction of the cost. This sparked greater urgency among American companies to expand their efforts, with the goal of further improving their models. 

Meanwhile, Trump’s ‘America First’ approach makes it unacceptable to lose to China on the AI front. To avoid this, he has escalated the trade war with China while enforcing tariffs on companies that refuse to bring their semiconductor production stateside. In addition, he’s pushed Intel to ramp up its production in America, releasing $5.7 billion sooner than projected under an amended CHIPS deal. Of course, the catch is that Intel had to allow the U.S. government to take a 10 percent stake in the company. 

All these actions are meant to prop up Intel in the hopes that a rejuvenated American tech giant can lead the charge to make the U.S. the epicenter of AI production. Although it is ambitious, Trump’s plan seems to be delivering returns already.  

Federal Support Fuels Intel’s Hot Streak   

Even before the Trump administration officially took stake in Intel, the mere possibility of a deal gave the company some much-needed momentum to land massive partnerships. In mid-August, Intel secured a $2 billion investment from SoftBank — nearly a full week before Trump and Intel’s announcement. A few weeks later, Intel then entered a $5 billion partnership with Nvidia to continue influencing the PC and data center markets with products like its latest “Panther Lake” processor.   

Feel-good vibes are buzzing around Intel as the company shows signs of recovery. Still, it’s unclear how long this hot streak will last, or whether the U.S. government’s investment in the chipmaker was a wise decision in the long run. 

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Trump’s Deal With Intel Could Be Bad Business for Everyone Else

This investment in Intel has raised serious concerns, as it’s a rare and risky measure typically reserved for emergencies. For reference, the last time the U.S government made a similar move was during the Great Recession in 2008 when then-President George W. Bush set aside $17.4 billion to bail out General Motors and Chrysler — a move that cost taxpayers more than $10 billion. 

Intel’s current situation doesn’t give a lot of reason for optimism: The chipmaker won’t have much use for federal funds unless it can convince customers to buy its products, and it’s also warned of “adverse reactions” in response to its deal with the Trump administration. To make matters worse, the government’s stake in the company consists of converted public funds from the CHIPS Act, so taxpayers will shoulder the costs if this deal doesn’t save Intel. 

Besides harkening back to a period of rampant corruption, Trump’s Intel deal poses the question of government overreach, especially since it is more than a one-off. The Trump administration has already taken stakes in mining companies MP Materials and Trilogy Metals as it tries to wrestle control of rare earth minerals away from China. Plus, it’s wielded its influence to prevent U.S. Steel from shutting down an Illinois plant. These maneuvers prioritize Trump’s push for American manufacturing at the expense of government guardrails. 

The fact that Trump has called for more deals like Intel’s may signal a new age of government intervention in the tech sector, raising questions about the use of public funds in private industry. It remains to be seen whether his administration will continue pursuing similar agreements or if the pushback will be too much. But for companies like Intel, deals like these will likely play a defining role in their future.

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