Drip. Drip. Drip.

AMD is an American microchip company. A number of years ago, it split off its manufacturing component from its design component, but still designs chips. It has become one of the most dominant players in microchip architecture.

Unlike its rival, Intel, AMD saw the need for battery efficient chips. It bet better than Intel. It will now be competitively disadvantaged by the United States government becoming Intel’s largest single shareholder.

Apple, too, is a major player in microchip architecture. Using ARM chip architecture, which is very power efficient, Apple engineers and manufactures all its chips for its devices. The Mac uses M-chips. The iPad Pro uses M-chips. Apple’s other devices use A-series chips. Many of Apple’s processing features run faster with less power than Intel’s chips.

But, again, the United States now is the largest shareholder of Intel, which puts every other microchip company at a disadvantage. Why? Because Intel now has subsidy by taxpayers. Instead of having to let the creative destruction of the market place pick apart Intel, which has chronically made bad decisions, the leadership that made those bad decisions has been rewarded.

Uncle Sam insists it will exercise no voting with its stock. But the fine print of the deal shows Uncle Sam is getting common stock with voting rights. Saying it will not vote and not actually voting are two different things. If the situation continues and a Democrat takes back the White House, you will see ESG and DEI explode as Intel seeks to humor its largest shareholder.

This is another step down a dangerous path. Defenders will say the government bailed out Fannie and Freddie. The government bailed out General Motors. The government even bailed out Chrysler.

The Chrysler bailout was a loan from the Carter Administration, but of what result? It ultimately went bankrupt and got bought by Europeans, having never fully recovered. GM, since its restructuring via private equity, has wasted its taxpayer bailout and profits on mostly canceled EV projects. Within the mortgage industry, Fannie and Freddie, controlled by the government, have stifled innovation in mortgage lending and contributed to increased costs for purchasers.

Government takeovers do not work well. Time and time again, the government creates moral hazard — companies know they can make ever riskier decisions and Uncle Sam will be there to bail them out. Just as too big a social safety net can cause Americans to make bad decisions knowing the government will take care of them through welfare, companies respond the same way.

The government keeps making companies too big to fail and hiding behind “national security” as the excuse. In fact, that has become the consensus talking point among defenders who will say things like, “I’m uncomfortable with this, but national security…”. It is an excuse and justification, but not reality.

Intel can now ignore most of its other shareholders. Its competitors now face a company subsidized unfairly by taxpayers. Its business decisions get to shift with the whims of political administrations.

This is a terrible decision. Donald Trump has beaten Mamdani to seizing the means of production.

When the government passed, via an act of Congress, TARP and bailed out banks and automakers, the tea party movement took shape and took to the streets. Now, many of the prominent tea party movement leaders have acquiesced. Power is intoxicating and seats at the table are precious. Meanwhile, another part of the free market breaks down.