The White House has confirmed that the Trump administration is in talks with Intel about acquiring a stake of up to 10% in the chipmaker.

"The president wants to put America's needs first, both from a national security and economic perspective," White House Press Secretary Karoline Leavitt confirmed on Tuesday after days of media speculation over a possible deal.

Although it would be unusual for the US government to take a stake in such a large company, it would align with President Donald Trump's trend of intervening in the free market during his second term.

Chipmakers Nvidia and AMD recently agreed to pay around 15% of their sales in China to the US government.

Another example was the recent sale of US Steel to Japan's Nippon Steel, a deal which gave the US government a so-called "golden share," giving President Trump sweeping veto power over US Steel's corporate decisions and the right to appoint a board member.

There was also the announcement last month that the US government would become the biggest shareholder in the US's only operational rare earths mine, owned by MP Materials.

More than a company?

"The Trump administration is really taking a broad view of what is possible for US government interventions in the private sector and very much pushing the limit," Geoffrey Gertz, senior fellow at the Center for a New American Security, told DW.

He describes the recent moves as "unusual," drawing a distinction between other administrations' attempts to stimulate entire sectors and Trump's more personal, targeted approach.

"They're cutting one-off deals with individual companies," he said. "That's quite a different approach from setting industry-wide industrial policy standards or guidelines."

Yet there is plenty of support for Trump's approach, particularly when it comes to sectors seen as strategically important in the US's ongoing rivalry with China, such as semiconductors and rare earths.

Sujai Shivakumar, director of the  Renewing American Innovation program at the Center for Strategic & International Studies in Washington, DC, says the global semiconductor industry is not a "level-playing field" given the massive state support provided in countries like China and elsewhere.

"Intel is more than just a company, and I think the decision to invest should be applauded," he told DW.

"It's time to understand that this kind of industrial policy is now the norm across advanced economies and that governments are providing this form of extensive support," he said. "If we hold to this myth of a purely pure market here in the US, it risks ceding the ground for one of the most strategic industries of the century."

Meanwhile, Gertz says it is not "inherently wrong" for the government to invest in Intel. "I do think there are strategic sectors, and there is a case for active industrial policy, again, particularly where there's national security spillovers," he said.

The importance of chips

Both the Biden and Trump administrations shared the goal of boosting the US's capacity to build advanced chips, needed for practically every aspect of the modern, high-tech industry.

The Biden administration introduced the CHIPS Act in 2022, legislation that received bipartisan support. The act earmarked substantial federal assistance and grants for companies such as Intel, Taiwan Semiconductor Manufacturing Corporation (TSMC) and Samsung to boost production on US soil.

Given that Samsung is from South Korea and TSMC is from Taiwan, Intel represents the most obvious prospect in terms of production within the US.

However, the company has been beset by problems in recent years. It has struggled to compete with TSMC in manufacturing the most advanced semiconductors for external clients and has also not captured a share of the market for AI data chips, dominated by Nvidia. Its revenues have been sluggish, and its share price has plunged.

Trump, who has been critical of the CHIPS Act, called for Intel CEO Lip-Bu Tan's resignation earlier this month. However, after meeting with Tan, his approach changed when the move to invest in the company gathered steam.

Sujai Shivakumar says Intel is the only US-headquartered firm within striking distance of regaining US dominance in advanced chipmaking and believes the company's potential justifies the US government stepping in.

"It needs commercial demand for its products to be viable, but it needs that viability to secure demand," he said. "So it's stuck in this rut. And unless there's a strong signal that it can actually find the traction to get out, it's going to be spinning its wheels."

Crony capitalism or a smart industrial policy?

Bloomberg reports that the deal could entail the US government taking an equity stake in exchange for some of the grants awarded to Intel through the CHIPS Act.

United States Secretary of Commerce Howard Lutnick is negotiating on behalf of the US government. He told CNBC that the US should "benefit" from that arrangement, saying "that is exactly Donald Trump's perspective, which is: 'why are we giving a company worth $100 billion this kind of money?'"

If the deal goes through, it is likely to raise some concerns over the Trump administration's increasingly robust approach to direct intervention in corporate America.

"There are risks of crony capitalism," says Geoffrey Gertz. "You can get to a situation where you're undermining competition, undermining long-term innovation by having a few favored companies who can frankly be a bit lazy because they know they are protected by the state."

Sujai Shivakumar says the key is to balance genuine strategic concerns and market forces.

"It's not that we should write a blank check," he says. "We can't leave everything up to the market. There needs to be some balance, a smart industrial policy that can help the company restore confidence among its customers, investors, and suppliers."

Edited by: Ashutosh Pandey