In a significant escalation of federal involvement in private enterprise, President Trump claimed that Intel had agreed in a meeting last week to give the US government a 10 percent equity stake in exchange for converting government grants pledged to the struggling firm under the prior administration. Days before the meeting, Trump had called for CEO Lip Bu Tan’s resignation over alleged ties to China—a move that, combined with the equity stake, signals a growing willingness to blur the line between private ownership and state control. SoftBank, meanwhile, disclosed a purchase of 2 percent of Intel’s outstanding shares shortly after the meeting. During today’s trading, Intel’s shares rallied 5.53 percent, though the precedent of federal equity claims raises long-term concerns over property rights and the politicization of corporate decision-making. It recalls earlier episodes of US industrial policy, such as wartime production controls and financial crisis interventions, when governments assumed temporary stakes or direct control over private enterprise.
There are a few things one should keep in mind about this equity stake and its implications:
For one, this equity stake sets a precedent for future government ownership of corporate America. One may ask: if the US government owns 10 percent of Intel today, why not 15 percent of Walmart tomorrow? Prior US interventions—such as wartime production controls or TARP-era equity stakes—were explicitly tied to crises and accompanied by clear exit plans. Investors understood these measures as extraordinary and temporary, with an expectation of eventual privatization.
This case differs in all those respects: no war footing, no financial meltdown, no sunset clause. The absence of a defined exit strategy signals a potential normalization of state equity ownership. Once government ownership becomes untethered from emergencies, it shifts from a one-off intervention to an institutional possibility. Investors must now price in the risk that political objectives will increasingly shape corporate governance and decision-making in the future.
Additionally, it creates competitive complications for other firms in the industry. An equity stake alters the government’s financial incentives toward the industry. Even without ownership, regulators can tax or impose compliance costs, but they lack a direct pecuniary interest in a specific firm’s profits. Once the state becomes a residual claimant, it gains both the motive and the means to tilt the playing field.
As public choice theory predicts, concentrated benefits plus dispersed costs invite rent-seeking; the equity stake simply magnifies the return to such political favoritism, raising the long-run risk of a state-sponsored monopoly.
It also creates investor uncertainty. An investor has to worry if the government decides that their company is not being run in the way it deems most productive for the collective interest. Non-pecuniary political objectives are more likely to factor into corporate decision-making, creating a risk premium and therefore a greater discount on future net income.
Firms that would be submarginal in a free market become marginal firms through successful rent-seeking. This prevents factors from being allocated to those lines of production that meet the most urgent consumer demands. State decision-making as a proxy for private shareholders undermines private property.
Furthermore, the administration has imposed an export tax on Nvidia and AMD, requiring payments on chips exported to China in exchange for export licenses. The policy introduces a discrepancy between the administration’s stated national security concerns and its willingness to permit sales conditional on payment. While the tax will impair Chinese industry, its immediate effect falls on Nvidia and AMD themselves. Taxes are not shifted forward. The effect of the export tax will be a reduction in net income. This reduction cascades backward through the production structure, ultimately lowering entrepreneurial profits and reducing the marginal value product of land and labor. In the long run, marginal firms throughout the production structure exit the line of production, and factors are withdrawn from lines that meet the most urgent demands of consumers. Because lower net income also means fewer retained earnings for reinvestment to counteract depreciation or expand the capital structure, the policy ultimately hastens capital consumption and impedes capital accumulation.
