Intel Corp (NASDAQ:INTC, ETR:INL) shares edged 2% lower in pre-market trading after it was revealed the Pentagon had pulled out of plans to provide a US$2.5 billion chip grant to the technology giant.
The Commerce Department, another US federal agency, is now facing pressure to make up the shortfall, however, the Pentagon’s decision places doubt on whether Intel will receive the full amount.
Funding from the two agencies adds to more than US$10 billion that Intel has been attempting to revive in incentives as part of the Chips and Science Act, which was signed into law by Biden back in August 2022.
The defence funding was also signed in by Biden, albeit over the weekend, and is set to allocate US$3.5 billion to Intel to help it develop advanced defence and intelligence-related semiconductors.
Yet, the Commerce Department, which issues the funding, has only been responsible for US$1 billion on the grant, with the Pentagon expected to cover the rest.
Leading up to the government funding deadline, the Pentagon scrapped the plans, according to reports, leaving the government leaning on Commerce to dip into other Chip Act funds to recover the balance.
Last month, Intel shares sank after reports suggested it was adjusting the construction timeline for its US$20 billion chipmaking project in Ohio.
The delay was due to market challenges and the slow disbursement of US grant money, the Wall Street Journal said.