By Aditya Soni, David Shepardson, Andrea Shalal and Max A. Cherney

WASHINGTON (Reuters) -President Donald Trump said on Friday the U.S. would take a 10% stake in Intel ( INTC ) under a deal with the struggling chipmaker that converts government grants into an equity share, the latest extraordinary intervention by the White House in corporate America.

The deal puts Trump on better terms with Intel ( INTC ) CEO Lip-Bu Tan, after the president recently said the CEO should step down due to conflicts of interest. It will ensure that the chipmaker will receive about $10 billion in funds for building or expanding factories in the U.S.

Under the agreement, the U.S. will purchase a 9.9% stake in Intel ( INTC ) for $8.9 billion, or $20.47 per share, which represents a discount of about $4 from Intel's ( INTC ) closing share price of $24.80 on Friday. 

The purchase of the 433.3 million Intel ( INTC ) shares will be made with funding from the $5.7 billion in unpaid grants from the Biden-era CHIPS Act and $3.2 billion awarded to Intel ( INTC ) for the Secure Enclave program, also awarded under Trump's predecessor, Democratic President Joe Biden.

Intel ( INTC ) stock rose roughly 1% in the extended session on Friday after closing up 5.5% during regular trading.

Trump met with Tan on Friday, a White House official said. That followed Trump's August 11 meeting with the Intel ( INTC ) CEO after Trump demanded that Tan resign over his ties to Chinese firms.

"He walked in wanting to keep his job and he ended up giving us $10 billion for the United States. So we picked up $10 billion," Trump said on Friday.

Commerce Secretary Howard Lutnick said on X that Tan had struck a deal "that's fair to Intel ( INTC ) and fair to the American People."

PLAYING CATCH UP

The Intel ( INTC ) investment marks the latest unusual deal with U.S. companies, including a U.S. government agreement allowing AI chip giant Nvidia ( NVDA ) to sell its H20 chips to China in exchange for receiving 15% of those sales.

Other recent deals include an agreement for the Pentagon to become the largest shareholder in a small mining company, MP Materials, to boost output of rare earth magnets and the U.S. government's winning a "golden share" with certain veto rights as part of a deal to allow Japan's Nippon Steel to buy U.S. Steel.

The federal government's broad intervention in corporate matters has worried critics, who say Trump's actions create new categories of corporate risk.

Ahead of the U.S. deal with Intel ( INTC ), Japan's SoftBank agreed to take a $2 billion stake in the chip maker on Monday.

Some industry observers still question Intel's ( INTC ) ability to surmount its problems.

Daniel Morgan, senior portfolio manager at Synovus Trust, said Intel's ( INTC ) problems are beyond a cash infusion from SoftBank or equity interest from the government, singling out Intel's ( INTC ) contract chip manufacturing business, known as its foundry unit.

"Without government support or another financially stronger partner, it will be difficult for the Intel ( INTC ) foundry unit to raise enough capital to continue to build out more Fabs at a reasonable rate," he said. Intel ( INTC ) "needs to catch up with TSMC from a technological perspective to attract business," he added.

The government's stake is to be passive ownership and does not include a board seat, Intel ( INTC ) said. The government will be required to vote with Intel's ( INTC ) board when shareholder approval is necessary, with "limited exceptions." Intel ( INTC ) did not specify the exceptions.

The equity stake also includes a five-year warrant at $20 a share for an additional 5% of Intel ( INTC ) stock, which the U.S. can use if Intel ( INTC ) loses control of the foundry business.

Federal backing could give Intel ( INTC ) more breathing room to revive its loss-making foundry business, analysts said, but it ceded the AI market to Nvidia ( NVDA ) and has lost market share to Advanced Micro Devices in its central processor business for several years. It has also faced challenges in attracting customers to its new factories.

Tan, who became CEO in March, has been tasked to turn around the American chipmaking icon, which recorded an annual loss of $18.8 billion in 2024 - its first such loss since 1986. The company's last fiscal year of positive adjusted free cash flow was 2021.