US Government Takes Direct Stakes in Companies Like Intel

The Trump administration has embarked on a novel approach to industrial policy by taking direct equity stakes in US companies such as Intel, moving beyond the traditional tools of loans and grants that characterized previous administrations’ strategies. While the Biden administration aggressively used public money through the CHIPS Act and Inflation Reduction Act to accelerate US industry via loans and grants, the current administration’s direct ownership approach represents a fundamental shift in how government interacts with private enterprise. This evolution from financial supporter to partial owner raises fundamental questions about the appropriate role of government in private markets.

The move toward direct equity positions marks a significant departure from established industrial policy tools. Where previous administrations provided funding through mechanisms that maintained corporate independence, the Trump administration’s strategy involves the government becoming a shareholder with potential voting rights and influence over corporate decisions. This transition from creditor to owner fundamentally alters the relationship between Washington and corporate America, creating new dynamics that could reshape how industrial policy is implemented for years to come.

The legal basis for the government taking direct stakes in companies like Intel and MP remains a critical unanswered question. Unlike the clearly authorized loans and grants provided through legislation like the CHIPS Act and Inflation Reduction Act, direct equity investments may require new legal justifications or interpretations of existing authority. This legal ambiguity creates uncertainty for both the government and the companies involved, potentially affecting market confidence and investment decisions.

Direct government ownership raises significant corporate governance concerns that were largely absent from previous industrial policy approaches. When the government becomes a shareholder in companies like Intel, questions emerge about how it will exercise its ownership rights, what influence it might seek over strategic decisions, and whether political considerations could override sound business judgment. The potential for government interference in corporate operations represents a fundamental shift from the arm’s-length relationship maintained through traditional loan and grant programs.

The strategy of taking direct equity stakes offers potential taxpayer upside that was unavailable through traditional funding methods. Unlike loans that provide fixed returns or grants that offer no financial return, equity investments could allow the public to benefit directly from the success of companies like Intel and MP. This potential for shared prosperity represents a theoretical advantage over previous approaches, though it comes with corresponding increases in risk exposure.

Direct government investment exposes public funds to market risks in ways that traditional industrial policy tools did not. While loans through programs like those established by the CHIPS Act and Inflation Reduction Act carried credit risk, equity investments subject taxpayer money to the full volatility of stock markets and company-specific performance challenges. This represents a significant escalation of risk compared to previous administration strategies, potentially putting public funds at greater jeopardy while creating new alignment between government interests and corporate performance.

The financial implications extend beyond simple risk-reward calculations to broader market effects. Government ownership in companies like Intel could influence stock valuations, affect competitor strategies, and potentially distort capital allocation decisions across entire sectors. These second-order effects represent additional considerations that policymakers must weigh when evaluating the appropriateness of direct equity stakes as an industrial policy tool.