Picking Losers: The Sorry Saga of Intel

Free marketeers are wont to decry the fiscal and regulatory interventions of government to “pick winners and losers” among competing firms. This platitude (like many others) has some usefulness, but only so far; its simplicity is both clarifying as a bumper-sticker-length principle and, on further reflection, somewhat misleading. In fact, it begs the question: the government’s efforts to select “winners” by no means guarantee that favorite companies, if not economically viable without subsidization, will succeed. The firms that regulators choose as the objects of their benevolence very often prove to be losers, despite their most fervent hopes and most energetic efforts. The troubles of firms not infrequently originate in the government’s interventions themselves.

The protracted story of the flagging semiconductor maker Intel’s bid for federal support, pockmarked by successive errors in both the C-suite and the White House, provides a case study in this inescapable fact of economic life.

Instead of being selected by market forces, Intel was coronated as a national champion of the semiconductor industry by Presidents Joe Biden and Donald Trump. The Biden administration dispensed billions of taxpayer dollars in outright subsidies to this Sick Man of the Chips Industry (and billions more in loaned funding), and yet the long-faltering company stumbled again, announcing the termination of 15,000 workers in August of 2024 and its largest quarterly loss ($16.6 billion!) that October. The marquee subsidies of Bidenomics could not propel Intel to victory.

The Biden presidency gave way to the Trump presidency, but, particularly since Inauguration Day 2025, Bidenomics and America First economic policy have in many aspects converged. (An echo, not a choice, indeed.) But along that road about which Friedrich Hayek warned the West in 1944, however, Trump in at least one respect ventured further than his predecessor. The Trump administration has acquired equity, a “golden share,” or a future right to purchase stock, in nine private companies (as of November). The most significant of these deals was made in partnership with Intel. The federal government took possession of a roughly 10 percent stake, becoming the company’s largest shareholder.

A recent report from The Wall Street Journal (WSJ) makes clear that Trump’s “assistance,” like Biden’s, has failed to transform Intel into a winner. Initially, “[i]nvestors assumed new orders would flow to the troubled chip maker and bid up the stock 120% in just five months,” WSJ relates, and “customer demand for Intel’s products did explode.” As the article details, the company remains adrift as it seeks to right years of miscalculations and missteps.  “After months of cutting capacity on its older production lines, the company was unprepared for a surge of orders for processors to put in AI data centers. Intel’s stock has crashed 17%, wiping out more than $46 billion in market value, since executives revealed the flub on the company’s fourth-quarter earnings.”

Intel’s latest struggles make clear the malign incentives erected in the course of pursuing the soft nationalization of private industry. Upon obtaining the White House’s imprimatur, investors stampeded to obtain their own portion of the projected profits—irrespective of the operative market forces and the shortcomings of the company. Sure enough, economic realities intervened. “The stock went vertical on vibes and tweets,” according to Bernstein analyst Stacy Rasgon. “In theory, they should be in place to capitalize on this demand, but they’re not.” Customers, too, sought to do business with the new political favorite. Yet Intel simply could not manage to fulfill this demand.

Marco Rubio, now Secretary of State (among many other things), once advocated “industrial policy done right.” One might wonder why free-market economists from Adam Smith to Milton Friedman never considered such an option. But, of course, they did, understanding that the knowledge problems and other difficulties that perennially afflict central planners apply to everybody, not just one’s political opponents. The letter that follows the name of an elected official neither increases nor diminishes his capacity to skirt the laws of basic economics. Intel was favored, and Intel floundered, under both Republican and Democratic administrations. Subsidization cannot make a winner out of a loser.