The Shareholder in Chief

By John R. Puri

Thursday, June 11, 2026

 

Early in his second term, President Trump announced his intent to establish a sovereign wealth fund for the United States — a government-owned investment vehicle similar to those run by petro-states. It didn’t seem as if he would get his wish. The federal government was running a $2 trillion deficit, not a surplus to reinvest, and Congress had no appetite to appropriate billions for a presidential hedge fund.

 

What Trump quickly discovered, however, was that he did not need congressional assent to start assembling shares in private companies. All he needed was good old-fashioned leverage, using statutory tools he already possessed. Whenever a firm sought the administration’s help or tried to access an existing federal grant or loan program, the president would ask for an equity stake in return.

 

He began last summer by exploiting an obscure account dating back to the Cold War that is authorized to support defense-critical industries. Typically employed to provide loans and purchase commitments, the fund was used by the Trump administration to acquire a 15 percent equity stake in MP Materials, which operates the nation’s sole rare earth minerals mine. The purchase instantly made the Defense Department the company’s largest shareholder.

 

One month later, Trump blew his first equity deal out of the water. He eyed an ownership stake in the struggling chip giant Intel, which was bleeding money and jobs despite billions of dollars in federal subsidies under the Biden-era CHIPS Act. Trump noticed that $5.7 billion in grants had previously been awarded to Intel but had not yet been paid. In exchange for releasing the promised funds, the administration asked for 10 percent of the company. Intel was happy to accede, winning the most powerful ally in the world.

 

Before 2025, economic analyst Scott Lincicome notes, the federal government had not made an indefinite, noncrisis investment in a healthy private company since at least the 1950s. The Trump administration has now taken more than 20 such stakes, targeting a range of industries from minerals and semiconductors to nuclear energy and quantum computing. There is no limiting principle at work; the government is taking equity in any company it can, on any terms, in any amount. It’s a scheme that progressives can fall in love with: Bernie Sanders is now clamoring to take government stakes in artificial intelligence companies.

 

This endeavor is enabled by a mix of old and new legislative appropriations written with few constraints on their deployment for stretchable ends: bolstering the defense-industrial base, accelerating innovation, etc. Congress clearly did not anticipate the current president’s cleverness.

 

Trump is reaping the benefits of the industrial policy pushed by his predecessor. The CHIPS Act and Biden’s green-energy law, the Inflation Reduction Act, gave the executive tens of billions of dollars that he could dangle. Last year’s reconciliation bill gave the Defense Department billions more to dole out, and the administration’s recent budget request would supercharge the military’s investment accounts.

 

Trump related his extralegal investment philosophy in an interview last December: “We should take stakes in companies when people need something. I think we should take stakes in companies. Now, some people would say that doesn’t sound very American. Actually, I think it is very American.” To call this approach transactional may sound trite — every equity deal is a transaction, of course. But conservatives have long insisted that government be the neutral arbiter of the marketplace, not an active participant. And, under law, the executive branch was never meant to trade special favors and taxpayer money for profit.

 

The president’s quest for ownership has pervaded his discretionary governance style. Executives are reportedly so afraid that Trump will demand stakes in their companies that they have rehearsed how they would respond in Oval Office meetings. Even when Trump doesn’t receive a stake, the mere prospect can affect his decision-making. When United Airlines’ CEO pitched him on a merger with rival American Airlines, Trump’s aides discussed whether to secure shares in the new company. The White House nearly bailed out Spirit Airlines with a $500 million loan because the failing carrier was prepared to hand over an 80 percent stake, until bondholders balked.

 

Treating federal agencies like venture capital firms risks that government will do poorly what it needs to do well. There is a strong national security case for using public funds to expand production of critical inputs, such as rare earth metals, for which we are dependent on China. It is essential to this mission, however, that finite resources are distributed to companies based on their viability and strategic necessity. With equity stakes on the table, government officials may instead be tempted to reward whoever presents the most attractive deal.

 

Some companies that the Defense Department has bought into, including MP Materials, are well-established producers looking to expand. Several others are start-ups that have barely gotten off the ground. Vulcan Elements, an aspiring rare earth magnet manufacturer, traded stock warrants for a $620 million loan despite employing fewer than 100 people. Trilogy Metals, a development-stage mining play in Alaska, got $35.6 million before it even applied for a permit. The department spent hundreds of millions of dollars for stakes in lithium and alumina producers — minerals that the United States sources from friendly South American countries, not from adversaries. It’s hard to say whether these companies would have received federal funds if they hadn’t offered shares. Conversely, what happens when an invaluable defense supplier refuses to fork over equity?

 

Federal stakes also threaten untold economic distortions. Once the government takes a financial interest in a particular company, the interventionism never ends there. Officials use the state’s power to privilege their investments over other firms, supplanting the market’s role in steering wealth and opportunity.

 

Intel is the clearest beneficiary of the president’s embrace. Since taking a stake in the chipmaker, the administration has worked to boost Intel’s business. Commerce Secretary Howard Lutnick has effectively become the company’s envoy, convincing the chief executives of Apple, Nvidia, and SpaceX to form lucrative partnerships with Intel rather than with more advanced competitors. They may not have had much of a choice in the matter: Apple relies heavily on special tariff exemptions, Nvidia has an agreement with Trump to bypass export controls, and SpaceX would not exist without federal contracts.

 

Through such favoritism, Trump’s investment picks distort the flow of capital. Government stakes are intended to “crowd in” private investment, thereby diverting resources from more intrinsically promising businesses that otherwise would have received that funding. Intel’s share price has skyrocketed since its deal with Trump, despite persistently poor fundamentals — a telltale sign of capital misallocation.

 

Positive returns for taxpayers often fail to translate into success for the nation. Government-owned companies may well see their valuations jump as investors seek the security of state backing, but that only means they are eating up resources that could have gone to more productive ventures. It’s the same model that has faltered in China — government directing capital to state-owned and politically favored enterprises — with misallocation costing the country trillions of dollars in missed economic output.

 

There are ways for government to secure critical supply chains without constructing a corporate patronage network. Indeed, that was the intent behind many of the programs that Trump is using to extract equity. But so long as the state is taking stakes in private companies, there can be no neutrality. The paper profits may be sweet, but the losses will be booked against sound governance and economic dynamism.