One of the cornerstones of President Donald Trump’s agenda is the strengthening of domestic business. Consistent with this goal, the administration recently announced a deal with U.S.-based semiconductor chip maker Intel for the purchase of an equity position in the company. The $8.9 billion investment represents an approximate 10% ownership stake, making the federal government Intel’s largest single shareholder; larger than Blackrock or Vanguard.
Given the essential nature of semiconductors and the risks associated with America’s dependence on chip production in East Asia, this may seem like a sound investment. However, government financial entanglements with public companies undermines market discipline and opens the consequences of longer-term government overreach.
The cost of this investment, no matter the share price, is too high.
The case for supporting Intel can certainly be made from both an economic and national security perspective. In fact, the Biden administration provided Intel with $18 billion in grants and loans under the CHIPS and Science Act in November 2024, citing the same basic rationale the Trump administration used to justify the current equity investment. Intel’s main competitors, Samsung and Taiwan Semiconductor Manufacturing Company (TSMC), gain a competitive advantage from significant governmental support in South Korea and Taiwan, respectively. Semiconductors are used in nearly every industrial sector, including the defense industry, and 60% of chip production occurs in the geo-political hotspot of Taiwan. If the United States cannot produce its own semiconductors, it risks losing both economic leadership and a military edge. A compelling argument for sure, but one which does not justify a government equity stake in Intel.
Free-market capitalism, so essential to economic liberty and business success in the United States, is enabled by a clear separation between business and government. When government plays an active role in a private business, the company becomes insulated from the market forces that drive innovation, efficiency, and responsiveness.
One only needs to look back at the “too-big-to-fail” bailout of General Motors and Chrysler during the 2008 financial crisis for an example of the negative impact of government investment. The government’s investment kept these firms from going under, but the American taxpayer paid the bill when shares were sold back at a loss. Politics, rather than market forces, played a larger role in corporate decision making and neither GM nor Chrysler emerged competitively transformed. Today, Intel finds itself in a similar situation. The company has fallen behind in technological innovation and production in key areas of the semiconductor market, all the result of corporate decision making, not a lack of subsidy.
The Trump administration’s deal with Intel is a poor investment choice for three reasons. First, it reinforces the too-big-to-fail mentality of business in America. Yes, semiconductors are a critical resource, but should it be the federal government’s job to identify companies or industries deemed to be critical and then expect taxpayers to foot the bill?
Second, government investment, even in a passive position like the one specified in the Intel deal, reduces voting leverage among shareholders and risks politicization of business decisions that should be left to those with agency and a fiduciary duty.
Lastly, a long-term investment in a private business risks undue influence based on the changing views of each subsequent administration, Democrat or Republican. Instead of becoming a shareholder, the Trump administration should continue to focus on pro-market initiatives like streamlining bureaucratic processes for business, developing more competitive tax policies, and strengthening patent and IP protections for American firms.
The challenge facing the U.S. semiconductor industry, and Intel in particular, is genuine. But subsidizing Intel through an equity investment is not the answer. Blurring the lines between Washington and American businesses by investing in the fortunes of a single company will not secure long-term competitiveness; it is more likely to undermine it. Strengthening the landscape of American business will not happen by the government picking a winner, but in continuing to rely on the principles and dynamics of a free market to reward those who earn success.