When Washington Becomes the Largest Shareholder
How Intel's boardroom became ground zero for America's shift toward state capitalism
The CEO Who Walked Into a Trap
Lip-Bu Tan has been running Intel for just four months, but his board meeting on Monday wasn't with directors—it was with Donald Trump. The president had called for Tan's resignation days earlier, citing his past business ties to China. By the end of the meeting, Trump was calling Tan's story "amazing" and discussing how the U.S. government might take a 10% stake in Intel, potentially becoming its largest shareholder.
The meeting crystallized a shift happening across corporate America. The Wall Street Journal's Greg Ip observed that "capitalism in America is starting to look like China." NPR's Jeffrey Sonnenfeld from Yale went further, calling it "Marxist MAGA." The hyperbole aside, something fundamental is changing in how Washington relates to business—and Intel has become the test case.
According to Bloomberg and CNBC reporting, the government is considering converting Intel's $8.9 billion in CHIPS Act grants into equity at $20.47 per share—a discount to market price. Commerce Secretary Howard Lutnick confirmed discussions on CNBC, arguing "we should get an equity stake for our money." At Intel's current market value, 10% would be worth roughly $10.4 billion, making Uncle Sam the company's top shareholder.
The Pattern Emerging Across Industries
Intel isn't alone. The Trump administration has already taken a "golden share" to facilitate Nippon Steel's acquisition of U.S. Steel, giving Washington veto power over certain decisions. The Pentagon bought $400 million in preferred shares of MP Materials, a rare-earth miner. Nvidia and AMD agreed to pay the government 15% of their chip sales to China in exchange for export licenses—essentially a profit-sharing arrangement dressed up as a licensing fee.
The Roosevelt Institute's latest analysis notes this represents a fundamental departure from traditional U.S. industrial policy. While the Biden administration's CHIPS Act, Infrastructure Bill, and Inflation Reduction Act allocated nearly $2 trillion in spending, they maintained the traditional grant-and-subsidy model. The Trump approach converts those grants into ownership stakes, blurring the line between public support and state capitalism.
Treasury Secretary Scott Bessent insists this isn't about control: "The last thing we're going to do is put pressure, is take the stake and then try to drum up business." But actions suggest otherwise. The administration has already pressured companies to change leadership, directed purchasing decisions, and extracted revenue shares from private transactions.
The Numbers Tell Their Own Story
Intel's struggles provide context for why the company might accept government ownership. The stock lost 60% of its value in 2024, its worst year on record. The planned $20 billion Ohio semiconductor facility has been repeatedly delayed. Former Intel CEO Craig Barrett told Fortune the company needs a $40 billion cash infusion to compete with Taiwan Semiconductor Manufacturing Company (TSMC)—nearly the entire CHIPS Act budget.
The semiconductor market tells a broader story. Gartner projects global semiconductor revenue will reach $717 billion in 2025. The U.S. share has declined from 37% in 1990 to 12% today, while China's industrial capacity has grown exponentially. As Senator Marco Rubio noted in National Affairs, "Our advanced weapons systems often depend on China—our most significant rival—for crucial components."
This dependency drives the policy shift. The Belfer Center for Science and International Affairs reports that China's state subsidies and "Made in China 2025" initiative have propelled it up the technological value chain despite U.S. export controls. East Asian competitors continue massive subsidy programs that make it "extremely challenging for U.S. manufacturers to compete if left to the whims of the international market."
The Investment Thesis Gets Complicated
For investors, government ownership changes everything. Katie Martin noted in the Financial Times that "the thumbs do not always point upwards" when government takes stakes. Share price might get a short-term boost—Intel jumped 7% on the news—but long-term implications are murkier.
J.P. Morgan Research's analysis of industrial policy effects shows mixed results. While the Inflation Reduction Act could double profit margins for renewable technology manufacturers by 2025 through tax credits, government ownership is different from subsidies. State shareholders bring political objectives that don't always align with maximizing returns.
The precedent matters more than the individual deal. If the Intel model spreads—government converting subsidies into equity across strategic industries—it fundamentally alters how markets value companies. Should markets price in potential government support? Or discount for political interference? The answer remains unclear.
The Tech Stack Gets Political
The administration's AI Action Plan, unveiled in July, adds another layer. It calls for fast-tracked federal AI adoption while limiting state-level regulations. Companies like Anthropic, Palantir, and IBM praised the deregulation aspects. But combining deregulation with government ownership creates an unusual dynamic: less oversight of technology development, but more direct government control of the companies developing it.
This contradiction appears throughout the new industrial policy. The administration criticizes the CHIPS Act while using its funds for equity stakes. It promotes free markets while taking board seats. It demands companies act independently while calling CEOs to the White House for "suggestions."
Discovery Alert's analysis warns this could turn "America's most innovative industry into a state-managed utility, sacrificing agility for control." The fear isn't unfounded. Government shareholders have different incentives than private ones. They care about employment in specific districts, supply chain sovereignty, and geopolitical positioning—not necessarily quarterly earnings or innovation cycles.
What Happens When Everyone Needs a Bailout
Intel's situation exposes a broader vulnerability. If the only U.S. company capable of manufacturing advanced chips at scale needs government ownership to survive, what about the next tier of strategic companies? Micron, GlobalFoundries, and others face similar challenges competing against subsidized Asian competitors.
The American Prospect's Harold Meyerson argues this represents "Trumpian capitalism"—a personalized version of state capitalism where control flows through the president rather than party structures as in China. But regardless of the mechanism, the direction is clear: more government ownership of strategic assets.
The timing matters. Goldman Sachs Research highlights that the U.S. needs to make these industrial policy decisions while managing $330 trillion in global debt and "quadrillions in notional value of derivatives." The fiscal capacity for endless subsidies doesn't exist. Equity stakes offer a way to support industries without immediate cash outlays—the government provides capital in exchange for ownership rather than grants.
Three Scenarios for Corporate America
The Contained Experiment Government stakes remain limited to truly strategic sectors—semiconductors, rare earths, perhaps advanced materials. The market accepts this as necessary for national security. Intel becomes profitable again with government support, validating the model. But most industries remain traditionally financed. This seems most likely given fiscal constraints and political resistance.
The Gradual Expansion Success with Intel leads to similar arrangements across technology and manufacturing. By 2030, the government holds minority stakes in 20-30 major corporations. A new class of "national champions" emerges—privately run but publicly influenced. Corporate governance evolves to balance shareholder returns with national interests. Markets develop new valuation models for these hybrid entities.
The Full Pivot Economic crisis or geopolitical conflict accelerates government intervention. What starts as minority stakes becomes majority ownership in critical sectors. The U.S. develops something resembling European-style state capitalism, with sovereign wealth funds and government-appointed board members. This seems unlikely without a major triggering event, but the framework being established makes it possible.
The Questions Nobody's Asking Yet
If government becomes a major shareholder, who manages those stakes? The Treasury? Commerce? A new sovereign wealth fund? The governance structure matters as much as the ownership itself.
What happens when administrations change? Does a future president inherit equity stakes they opposed? Can they sell them? The permanence of government ownership versus the temporary nature of political power creates inherent tensions.
How should markets price risk when the largest shareholder can change export rules, mandate purchasing decisions, or demand CEO resignations? Traditional models assume shareholders want maximum returns. Government shareholders have multiple, sometimes conflicting objectives.
The New Reality for Executives
Tan's experience shows the new playbook for CEOs. Avoiding Washington is no longer an option. The choice isn't whether to engage but how. Some executives, like Intel's Tan, try accommodation. Others might try resistance, though none have successfully challenged Trump's demands yet.
Yale's Sonnenfeld suggests collective action: "They can't do it on their own." But corporate America has shown little appetite for confrontation. Each company calculates that cooperation beats conflict, even if the collective result weakens private sector independence.
The irony is striking. Republicans who spent decades warning about socialism are implementing something resembling it. Democrats who pushed for more government intervention worry about the personalized nature of Trump's approach. Traditional categories—free market versus state control, conservative versus liberal—don't capture what's happening.
What This Means for Markets
For investors, the Intel deal represents a new category of risk and opportunity. Government-backed companies might be safer from bankruptcy but less free to pursue profit maximization. They might get preferential treatment in government contracts but face political pressure on employment and investment decisions.
The smart money is already adjusting. Stocks jump on news of potential government stakes, suggesting markets see short-term value. But longer-term pricing remains uncertain. Should Intel be valued as a tech company or a quasi-state enterprise? The answer determines whether it trades at 15 times earnings or 25.
For America's economic future, the stakes are higher. The shift toward state capitalism might secure critical industries and counter Chinese competition. Or it might create inefficient national champions that can't compete without perpetual support. The Intel experiment will provide the first real data point.
What started as emergency support for a struggling chipmaker has become something larger—a test case for whether America can compete with China's state capitalism by adopting elements of it. The answer will shape not just Intel's future, but the structure of American capitalism itself.
One board seat at a time.