Shares of Intel (INTC -8.92%) are falling on Thursday. The chipmaker's stock had lost 8.7% as of 12:20 p.m. ET. The drop comes as the S&P 500 and Nasdaq Composite both lost more than 5%.
Intel's stock is feeling pressure from the ongoing trade war with China as well as a Reuters report today that revealed its new CEO has extensive business ties in the country, raising concerns of a potential conflict of interest.
A report from Reuters revealed today that Intel CEO Lip-Bu Tan has extensive investment connections to Chinese companies. Some Chinese companies that Tan has invested in have ties to the Chinese military. The report outlined how Tan has made hundreds of investments in Chinese companies over decades through the investment firm Walden International, a venture he founded in 1987, as well as two Hong Kong-based holding companies, Sakarya Limited and Seine Limited.
The most troubling investment, although one that Tan has now exited, was his seed investment in Semiconductor Manufacturing International Corp. (SMIC), China's largest chip foundry and major supplier of the Chinese military. The company is under sanction from the U.S. Walden International remains invested in 20 funds and companies alongside Chinese government funds or state-owned enterprises, according to Reuters. Tan remains is chairman of Walden International.
Intel is in a critical transition period as Tan takes over a struggling business. It's unclear what the ramifications will be, but given the sensitivity of the semiconductor industry, its importance in national security, and the ongoing tensions with China, the revelations could derail some of Intel's turnaround efforts. I would avoid Intel stock for the time being.
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