Intel Shares Fall on Report That Pentagon Withdrew $2.5B Chip Grant

Intel Corp. (INTC) shares fell 3% Wednesday after the Pentagon reportedly pulled out of a plan to spend as much as $2.5 billion on a chip grant for the company.

According to Bloomberg, the Pentagon’s decision may decrease the federal funding that Intel will have access to and push the chipmaker to get more money from the Commerce Department, which disburses Chips Act grants. The Commerce Department previously had only been responsible for $1 billion of the cost. 

Apart from getting defense money, Intel has been seeking incentives valued at more than $10 billion from the CHIPS and Science Act, according to Bloomberg. 

The defense funding was part of a spending package that President Joe Biden signed into law over the weekend, and would have given Intel $3.5 billion to produce advanced semiconductors for military and intelligence programs.

The article didn’t explain why the Pentagon pulled the funding. 

The Pentagon withdrawal of funding comes as Intel recently reported that the U.S. government gave the company a billion-dollar contract “to create this trusted, secure environment,” and said it expects to benefit from CHIPS Act funding. Intel Foundry’s growth could help the U.S. gain a larger share of the global market for semiconductor manufacturing, which is currently dominated by Taiwan, thanks in large part to Taiwan Semiconductor Manufacturing Co. (TSM).

Intel shares slid 3% at $43.80 at 1:10 p.m. ET on Wednesday.