Good morning. Andrew here. As the government negotiates for a stake in Intel, SoftBank is buying into the chipmaker, too. The big question: Where is demand for Intel chips going to come from? Is the Trump administration going to pressure tech giants to buy Intel chips, even if they are a lesser product? You might recall that the Biden administration tried to persuade big tech companies to buy Intel chips, but most demurred. Will this White House use more aggressive sales tactics? (Was this newsletter forwarded to you? Sign up here.)
Intel and the new U.S. capitalism?We asked last week whether the U.S. government taking a cut of some artificial intelligence chip sales to China could be seen by Beijing and others as a sort of state-sponsored capitalism. What Washington may do with Intel is a potentially bigger step down that road. It’s understandable why the Trump administration is weighing whether to take a large stake in the embattled chipmaker. But doing so could lead to major consequences for the tech industry, the A.I. race — and the federal government’s relationship with private enterprise. The details (so far): The White House may seek to convert roughly $10.9 billion in federal grants to Intel, given as part of the Biden administration’s CHIPS and Science Act, into a 10 percent stake in the company, according to The Times, Bloomberg and The Wall Street Journal. (The mechanics of doing so aren’t yet clear.) Commerce Secretary Howard Lutnick believes that turning the grants into an ownership stake might be the best way to help Intel while protecting U.S. taxpayers’ interests, The Journal adds. It’s another twist for Intel. This month, President Trump demanded that Lip-Bu Tan, Intel’s C.E.O., resign because of his past business investments in China. Then Tan met with Trump last week at the White House, which seemingly changed the president’s mind about him: Trump praised Tan’s “amazing story” and called their discussion “interesting.” Late yesterday, Intel got another boost when it emerged that SoftBank would buy a $2 billion stake of the chipmaker’s shares, as part of the Japanese tech investor’s big bet on A.I. (That push also includes SoftBank buying a former car factory in Lordstown, Ohio, from Foxconn to use for its big data center venture.) The SoftBank announcement lifted Intel’s shares, after the stock sold off on news about the potential extent of the stake the Trump administration could take. Money alone won’t solve Intel’s problems. What the company needs most is customers and innovative new products. It’s far behind Advanced Micro Devices and Qualcomm in making chips for personal computers and behind Nvidia in producing A.I. processors. Intel’s foundry division, which makes semiconductors for other companies, badly lags Taiwan’s TSMC. Intel also said that it wouldn’t deploy large-scale manufacturing until it signed up enough customers for its advanced production techniques, raising questions about whether the chipmaker would fall more behind. We have many more questions:
More on chips: Nvidia is working on a new, weaker version of its Blackwell processor for the Chinese market, Reuters reports, after Trump signaled that he may be open to allowing exports of more advanced A.I. processors to Beijing.
S&P maintains America’s credit rating, thanks to tariffs. The debt rating agency kept the United States at an AA+/A-1+ with a stable outlook, saying that “meaningful” levy revenue would generally offset the negative fiscal effects of Republicans’ domestic policy law. It’s the latest sign that the federal government could become dependent on tariffs for revenue, even as they threaten to weigh on consumers and businesses. A former Justice Department official accuses leaders of undermining antitrust efforts. Roger Alford, a former top competition official at the department who was fired last month, said that two senior aides to Attorney General Pam Bondi — including Chad Mizelle, her chief of staff — dealt with favored lobbyists. (He specifically cited the department’s U-turn on Hewlett Packard Enterprise’s deal to acquire Juniper Networks.) Alford’s accusations raise further questions about the Trump administration’s antitrust approach. Air Canada reaches a tentative deal with its flight attendants. The agreement, including a proposed increase in wages, could end a strike by roughly 10,000 union members that has disrupted air travel across Canada since Saturday. But the union’s members must still approve the pact; it’s unclear whether they will be satisfied with its terms. Chamath Palihapitiya gets back into the SPAC business. The venture capitalist filed yesterday for the I.P.O. of a special purpose acquisition company, seeking to raise $250 million for the vehicle. Palihapitiya became a public face of a previous boom in SPACs, which raise money from public investors that they use to buy privately held businesses and give them stock listings; the investor took heat for the poor performance of earlier vehicles. The Ukraine effect on global tradeA day of intense diplomacy at the White House delivered no sign of a breakthrough in halting the war in Ukraine, though Kyiv and European allies scored some wins. Looking more broadly, the latest efforts to end Russia’s invasion is already altering geopolitics and global trade. Here’s what President Volodymyr Zelensky of Ukraine and the European leaders achieved:
Trump temporarily stepped away from his meeting with European leaders to call President Vladimir Putin of Russia in an effort to arrange a round of peace talks between the Russian leader and Zelensky. But the Kremlin hasn’t yet committed to such dialogue. Some European leaders appear to be considering a tougher line on Moscow. President Emmanuel Macron of France told NBC News yesterday that a new round of direct and secondary sanctions were still possible if peace talks falter. It’s unclear if secondary sanctions would hit Russia’s biggest trading partners, including India and China, too. Putin has been working the phones as well. Prime Minister Narendra Modi of India said yesterday that he spoke with Putin, calling him a “friend,” and that the two discussed bolstering bilateral cooperation. Facing even stiffer Trump tariffs that are set to go into effect next week, India appears to be doubling down on improving relations with Moscow — and with China, as Modi is set to meet today with Wang Yi, Beijing’s foreign minister. Multinationals will be watching. The diplomatic maneuvers come as Apple is set to expand some of its iPhone production in India, Bloomberg reports. The American tech giant has been reducing its exposure to Chinese manufacturing in recent years, an effort that has accelerated amid Trump’s trade war. Could the latest geopolitical maneuvering throw that strategy into disarray?
“Part of me thought, maybe Trump could accomplish what I never got done.”— Shari Redstone, the media heir who controlled Paramount until the company closed its sale to Skydance. Redstone told The Times’s James Stewart that she had grown frustrated with aspects of CBS News coverage of Israel’s war with Hamas and had come around to understanding President Trump’s argument that the network lacked editorial balance. Redstone also spoke at length for the first time about selling her family’s media empire and settling a closely scrutinized lawsuit with the president. A housing crunchThere’s some good news for prospective home buyers: Mortgage rates are near a 10-month low, as markets anticipate that the Fed will soon cut borrowing costs. The problem, though, comes down to supply, as Americans increasingly opt not to buy or rent a new place to live. Can lower rates jump-start the market? The U.S. housing crisis became a major issue on the 2024 presidential campaign trail, but house sales have dropped this year in much of the country as prices hit new records. Yet with the average rate on a 30-year fixed-rate mortgage dropping to 6.58 percent last week, “purchase application activity is improving,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Rates could fall more. But that largely depends on whether jobs and inflation data bear out further rate cuts by the Fed. “Unless the labor market weakens substantially,” Lu Liu, an assistant professor of finance at the Wharton School at the University of Pennsylvania, told DealBook, “it seems unlikely that rates will come down to levels that will fully unlock the mortgage market.” The housing lock-in effect could have implications for the labor market, too, she added, especially if companies find it harder to hire employees because of a lack of mobility in the work force. Many homeowners secured mortgage rates below 3 percent early in the coronavirus pandemic. Today’s rates are far higher, creating a “powerful disincentive” for people to move, Jeff Ostrowski, a housing market analyst at Bankrate, told DealBook. The frozen housing market also signals a big reversal, and calls into question the dynamism and mobility that once defined the U.S. economy. More than half of U.S. homeowners say that there is “no mortgage rate at which they would be comfortable with selling their home this year,” according to a recent survey from Bankrate. Watch what major home improvement retailers have to say. Home Depot, which posted a disappointing profit this morning, and Lowe’s, which reports results tomorrow, could offer insights into the health of the housing market. These chains have seen a boost from remodeling projects as people opt not to move. But the downturn in home sales could eventually weigh down the remodeling boom, Ostrowski warned. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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