The people’s chip manufacturer

Katie Martin (0:06)

Pushkin. What do microchips and roadside restaurants have in common? Well, companies in both of those sectors have found themselves in the line of sight of Donald J. Trump. The US president has been doing some pretty weird stuff recently. He struck a deal where the government bought a 10% stake in Intel, the chips maker. That's a weird sort of free market capitalism you got going on there. And this was on the back of deals with Nvidia and AMD to take a slice of their revenues from chip sales to China. Then along comes Cracker Barrel. Now, I'm a Brit. I'm not familiar with Cracker Barrel, but it's a big restaurant chain in the US and Trump did not like its rebranding. So this grabbed it. Today on the show, we're asking, what on earth is going on here? Is this some sort of shakedown economy? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist here at FT Towers in London. And no, I really don't get what Cracker Barrel is, but joining me down the line to tell me is this week's Token American. Listeners, got a treat for you here. It's our US managing editor, Brooke Masters, who's one of the people who makes the FT really tick and is a really fast-talking New Yorker under strict instructions to slow down. Brooke, I can't guarantee you'll have fun, but I will try.

Brooke Masters (1:30)

I'm looking forward to it, Katie. It should be great.

Katie Martin (1:34)

She's talking so slow. So there's been a real blizzard of presidential involvement, I'm going to say, euphemistically, in American corporate life recently. Really quickly, let's start with Nvidia and AMD. What happened there?

Brooke Masters (1:53)

Trump had been saying he was going to prevent them from exporting their H20 chips to China for national security reasons. But, he said, if you give the US government 15% of sales, so basically an export tax, then you can do it. And it's a straight up company-specific tax. It hasn't actually been entirely finished yet, they're still writing the rules. But it's absolutely, you want to do something, give me a kickback. It's definitely a shakedown economy.

Katie Martin (2:24)

It's amazing. And then, so Intel comes along, and first of all, the president took some sort of exception to Intel's chief executive and said that he has to go, it's the only answer. This seemed to kind of come out of pretty much nowhere. But then struck a deal with Intel, which is even more meaningful actually than the cut of revenues thing, right? Like what happened with Intel?

Brooke Masters (2:44)

Intel's basically giving the government, but Trump sees the government as himself, as a 10% stake. They're doing some weird swap-a-roo where the big grants that are getting given to Intel to build chip factories in the US are going to be converted into equity. And so instead of getting money from the federal government and then doing something corporate and acting like a normal company, which is how it has been done in the past, the government is taking a direct stake. In the past, the US government has only taken direct stakes in companies it was rescuing, you know, like AIG, which, remember that? I'm sure that almost took down the world economy. The idea that you would take a stake in a company that's basically functional is very strange.

Katie Martin (3:28)

So let's just look at sort of tech in the round here to start with. I guess you can argue tech is a strategic priority for the US. Maybe it should get some sort of special treatment. But I mean, from over here, this looks super weird. Like, what do you think it is? What does it mean?

Brooke Masters (3:47)

I think you have to remember that Donald Trump sees himself as a dealmaker. And he also sees himself as someone who is extracting money and benefits for himself, for the people he represents, for his voters. And so this is his idea that this is how we're going to get the money that's been accruing to the tech billionaires and get it for America. And we're going to make America great by extracting this money.

Katie Martin (4:14)

So it's like a Robin Hood thing. Sort of.

Brooke Masters (4:16)

Yeah. It's also, I mean, it's completely inimical to the way we normally run the American economy, where free market, free market, free market. The American government doesn't meddle in corporate leadership, even of banks. You're allowed to appoint who you want to appoint most of the time. But this time, Trump is saying, let's throw that out the window. We're going to have an industrial policy, but it's not a planned sector by sector industrial policy. It's like, I've picked this company, I'm going to do something to it policy.