Intel to Receive $8.5B in Grants to Build Chip Plants

> I never understood the anti-dividend and anti-buyback mindset.

I'll try to explain it.

Companies use stock buybacks to give away massive amounts of capital. Capital that they clearly need for their long term health. Then, because they're important to the economy when they have a downturn they come to taxpayers and ask for massive amounts of cash.

This is for example what happened to the airlines which then got over $50 billion or so in bailouts. They spent about 80% of that in the previous few years on stock buybacks. They would have been healthy enough to survive without the bailouts. So what happens is companies give their money away to the rich, constantly fail because of that, and take money away from the poor to cover up for their failure.

Stock buybacks create a conflict of interest where companies can directly manipulate their stock prices. So instead of building the best enterprise, they can pump money into bringing their stock up artificially.

The fact that this overt manipulation of your own stock price is bad was well understood after the Great Depression and that's why it was basically banned by the act that set up the SEC in 1934. The SEC then passed Rule 10b-18 granting companies an exception from the market manipulation rules under Reagan.

That's a pretty clear case of a regulatory agency going against the will of Congress to create basically its own law. It will be interesting to see what happens to Rule 10b-18 if the Supreme Court reverses Chevron in a few months.

> The new CEO banned buybacks.

Of course. After 20 years of stock buybacks where they gave away the vast majority of their cash the new CEO wants money from the CHIPS act which says they cannot have buybacks for 5 years.

It will also be interesting to see if the CHIPS act has any teeth. BAE took the money but is doing buybacks anyway.

This is too long of a topic for an HN post. Here's a nice and balanced writeup https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3639389

My personal position is far more extreme, there should be a clear ban and the SEC should not be allowed to overturn the law as it was written with a regulation. Certainly if the EPA cannot regulate carbon through the same logic, the SEC should not be allowed to do so.

If you want a gentler writeup, this HBR article has it. https://hbr.org/2014/09/profits-without-prosperity

I'm sure Intel will be very happy to bolster their cash savings with this investment. Or have we already forgotten about that broadband investment from way back?

I feel sorry for any startups looking to innovate in this space. It's hard enough competing against established players without them getting billions in free money.

Intel has had the resources to build out fabs in the US for decades. Instead, they've chosen to build elsewhere, and now they're rewarded for it?

They recently announced their $20b facility in Ohio is being "put on hold":

https://www.tweaktown.com/news/96969/intel-delays-launch-of-...

While at nearly the same time announcing a $25b facility in Israel:

https://www.cnn.com/2023/12/26/tech/intel-israel-investment/...

That’s not the point of the chips act it’s to nearshore fabs.