The government’s investment in Intel has attracted capital and seems set to attract more. A success (so far) it seems, but at what cost?
The Intel share price is rocketing. At the time of writing, it is up 68 percent this year, with a massive spike in recent weeks.
Investors are piling into bullish bets on Intel Corp., betting that a weeks-long rally following a string of investments from the US government, Nvidia Corp. and others will continue as the chipmaker seeks further tie-ups. . . .
Potential tie-ups are thought to include deals with Apple and even Taiwan’s TSMC.
Intel’s stock price saw its ups and downs earlier on in the year, but it has been powering upwards since the company’s involvement with the government, uh, deepened. In many respects this is how industrial policy is meant to work. In this case, the government’s investment in Intel has attracted capital and seems set to attract more. A success (so far) it seems, but at what cost?
For example, will companies partnering or doing business with Intel be doing so on Intel’s technological merits or because they believe that it is a way to curry favor with the administration, or because they believe that Intel’s, uh, link with the government is going to bring them more business? And is this likely to incentivize technological innovation?
Will this process divert capital away from technologically more promising investments?
And so on and so on.
In dangerous times, there is a decent argument for ensuring that the U.S. has sufficient domestic chip manufacturing capacity, even if that is not the most economically efficient way to proceed. As Adam Smith put it, “Defense . . . is of much more importance than opulence.” However, being aware that the cost of establishing that capacity includes opportunity cost is important if it is to be kept to a minimum.