President Donald Trump is moving to bolster critical industries by taking equity stakes in private companies, a step the White House says is vital for national security but that some experts warn could backfire.
On Friday, the Trump administration announced it would acquire a 10% stake in U.S. chipmaker Intel and suggested similar action may follow with other companies. Officials say the goal is to secure industries vital to national security, but critics argue that the move creates perverse incentives that weaken the very sectors it aims to strengthen and sets a dangerous precedent that future administrations will exploit.
“It is exactly the heavy-handed government that got us into this mess,” Richard Stern, acting director of the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation, told the Daily Caller News Foundation. “The solution simply is not going to be yet more heavy-handed government action. That will just make the problem worse.”
As part of the deal, $8.9 billion in 2022 Chips and Science Act grant funding that Intel was slated to receive will be converted into an equity stake in the company, making the federal government the largest shareholder. Intel stock has tumbled since the start of 2024 as the company struggles to compete in the global market.
The White House defended the Intel deal as a narrow, national-security-driven measure.
“This is really just us trying to shore up what we’ve identified is a national security concern — the domestic production and design of semiconductor chips — and make sure we do it in a way that the taxpayers can get in on the upside as opposed to just doling out money with no strings attached,” a White House official told the DCNF. “I don’t think this is a blueprint or a framework for something beyond this one very specific situation.”
However, Trump on Monday suggested that similar deals could be on the horizon.
“Why are ‘stupid’ people unhappy with that? I will make deals like that for our Country all day long,” Trump posted on his Truth Social platform. “I will also help those companies that make such lucrative deals with the United States. I love seeing their stock price go up, making the USA RICHER, AND RICHER.”
The Trump administration also announced in July that it would purchase $400 million of stock in mining company MP Materials as part of its effort to boost the production of rare earth minerals, critical to national defense and commercial supply chains. Trump also obtained a “golden share” with veto rights tied to Nippon Steel’s purchase of U.S. Steel and secured the government a 15% cut of Nvidia and Advanced Micro Devices sales in China in exchange for export licenses.
Stern warned that the government is ill-equipped to act like a hedge fund with taxpayer dollars.
“The government is very bad at managing almost anything, so the last thing you want is the government with a 10% stake in a publicly traded company, where the federal government has voting rights to make decisions,” said Stern. “By establishing a precedent that this sort of thing can happen, you create a permanently different financial market and business climate in the U.S. — one that always has to keep a weather eye out for that kind of government involvement and control using taxpayer money.”
Ryan Young, senior economist at the Competitive Enterprise Institute, drew parallels to the welfare state.
“Many of the arguments that conservatives have been making for decades about the welfare state, I think, apply here,” Young told the DCNF. “They’ve said for a long time that welfare payments take away individuals’ incentive to work, they make them dependent on the government. Those same things apply to corporate welfare as well.”
In fact, the idea of government taking a stake in Chips Act recipient companies was first proposed by Democrat Sen. Elizabeth Warren of Massachusetts and Independent Sen. Bernie Sanders of Vermont in 2022 when the bill was making its way through Congress.
“If Intel is more concerned with currying favor with Washington than with its customers, that doesn’t bode well for Intel’s future as an innovator, or ability to remain competitive in a global market. It’ll probably just be angling for more subsidies or special treatment from the government,” said Young.
Stern warned that a future administration could do “very nefarious things” as a shareholder.
“The last thing I want is woke unelected bureaucrats holding that kind of power over any company in America,” Stern said.
Young echoed concerns that the Trump administration’s move would set a negative precedent, which future Democratic administrations would likely exploit.
“It’s not like the Democrats are gonna want to give back all these cool new executive powers,” said Young. “The next Democratic president might take these powers and use them to expand government ownership in renewable energy or health insurance. We might see a public takeover of the press. There are all these future consequences that I don’t think the Trump administration was thinking through.”
Both experts argue that the administration should focus on deregulation and pro-business reforms rather than on ownership of private companies.
“If part of the administration’s goal is to make more things in America, they should look to regulatory reform, to tax reform, to making it easier to build things in America, to loosen some of the excessive permit restrictions,” said Young. “I worry that we’re gonna find out the really hard way that public control or even outright public ownership of private companies is going to be a disaster.”
Since assuming office, the Trump administration has made deregulation and tax cuts a central part of its agenda. The GOP’s One Big, Beautiful Bill Act permanently extended the tax cuts implemented during Trump’s first administration and introduced additional reforms, including the Pass-Through Entity Tax deduction and other deductions for research and development investments, which earned numerous major business endorsements.
“The One Big, Beautiful Bill had full equipment expensing. That’s why we’re doing rapid deregulation. That’s why we’re unleashing American energy for energy abundance and lower energy costs,” the White House official said. “This isn’t a rebuffing of the free market. This is a laser-focused, tailored national security prerogative that’s being done in a way that ensures the taxpayers are getting a fair bargain.”
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