Last Updated on November 7, 2025 by Chicago Policy Review Staff
President Trump’s decision to seek government equity and revenue sharing in major chip companies, including a 9.9 percent non-voting stake in Intel and proposed deals with Nvidia and AMD, has sparked rare, intense bipartisan backlash; a sign of deep controversy surrounding direct government involvement in the tech sector. Sen. Rand Paul (R-Ky.) called it a “terrible idea,” asking, “If socialism is government owning the means of production, wouldn’t the government owning part of Intel be a step toward socialism?” Gov. Gavin Newsom mocked it as “Chairman Trump’s socialist republic,” declaring, “ALL HAIL CHAIRMAN TRUMP! WITH HIS GLORIOUS 10 % PURCHASE OF INTEL, THE SOCIALIST REPUBLIC OF AMERICA ENTERS A BOLD NEW ERA OF GOVERNMENT-RUN BUSINESS.“
Both men paint a scene of government overreach, socialism, or Trump-era corruption. These arguments are short-sighted, ignore the economic history of private-public partnerships, and lack the vision of a new wave of the U.S. military-industrial complex.
The essential question is not whether the government should play a role in industries vital to national security, but how the White House can design a modern blueprint for strategic partnerships with technology companies, chipmakers, and rare-earth mining firms.
The United States has long stepped into strategic industries during moments of vulnerability. During World War II, the federal government constructed and owned industrial facilities that private capital was reluctant to fund. Later, Washington took temporary equity stakes in banks and automakers during macroeconomic shocks. These interventions were not “socialist” failures but pragmatic, and stabilizing policies.
Just as the government built the military-industrial complex through the industrialization of Lend-Lease during World War II and expanded it through the Cold War arms race, today’s dependence on China for rare earths and chip making materials represents a new threat; one that marks the need for a third wave of the military-industrial complex. Just as the wartime buildup of vehicles, vessels, and aircraft required decisive government coordination, the same level of focus is now needed for domestic rare earth and semiconductor production to safeguard national security.
Similarly, the relationship between the government and defense giants like Lockheed Martin, which derives over 70% of its revenue from the U.S. government, is never framed as a failure of capitalism or crony socialism, but as a cornerstone of national security. These companies are, in many respects, quasi-state entities, deeply integrated with public policy and funded by public dollars.
The escalating trade war between the United States and China has renewed focus on rare earth metals and semiconductors—the twin foundations of modern technology and defense. These industries now define the next frontier of strategic competition. To preserve U.S. dominance, Washington must treat this technological front with the same strategic discipline once applied to wartime production.
This new phase is defined not by tanks and missiles but by AI, semiconductors, and perhaps the critical rare-earths and hardware that underwrites both digital infrastructure and defense capability.
Taking equity stakes in semiconductor firms is therefore a pragmatic step, rooted in precedent and geared toward national security. Semiconductors are the backbone of smartphones, cloud computing, artificial intelligence, and F-35 fighter jets. Today, over 90 percent of the world’s most advanced chips are produced in Taiwan by TSMC. A Chinese blockade or invasion would paralyze U.S. defense systems and stall the global economy overnight. By taking equity, the United States gains both financial leverage and influence over technologies central to its economic and strategic future.
These same principles should guide investment in rare-earth extraction and processing. These materials are essential to defense, batteries, and renewable technologies, but the U.S. remains heavily reliant on China. This model builds resilience by securing supply at home. Beijing has repeatedly used rare-earth exports as leverage in trade disputes; in conflict, that supply could be cut off entirely.
The fairness argument matters. The CHIPS Act allocated $52 billion to boost domestic chip production but took no equity in return. Framed differently, taxpayers subsidize the risk while shareholders benefit from investment and institutional backing, essentially creating a system of privatized gain and taxpayer-funded risk or socialized losses. We have seen this time and time again, such as the airline bailouts during COVID in the early 2020’s or the TARP bailouts for Global Systemically Important Banks (G-SIBs) in 2008. In both instances, the Federal Government and taxpayer bore the risk of funding critical industries during a macro-economic shock while the private market reaped the benefits of the institutional stability that comes with the full faith and credit of US government.
Current subsidies already constitute a form of hidden government intervention; equity simply makes that intervention transparent and ensures taxpayers’ share in the upside. If the public backs Intel with billions, it deserves a return when Intel profits.
Critics are right to warn that without clear safeguards, such interventions risk becoming wasteful or corrupt. Poorly structured programs can invite cronyism and inefficiency. Congress should set a default 5–15 percent equity share for any subsidy over $1 billion, ending ad hoc deals. These stakes should be passive with no voting rights on management. Companies receiving federal investment should be subject to deeper financial scrutiny than required by the SEC for public companies. Earnings need to be reported more frequently, and companies should disclose how federally invested funds are allocated.
Equity should be structured as long-term strategic capital, ensuring the government maintains a vested interest in critical technologies while aligning national-security goals with market incentives. Critics often ask where the investment returns go and how it could benefit the taxpayer. Returns could be reinvested by the federal government in a sovereign wealth fund or returned to taxpayers by closing the funding gap in social security. Further, investment returns could be utilized as a discretionary fund that could cover emergency situations like natural disaster relief or SNAP funding during a government shutdown. Stakes should also encourage workforce training, a commitment to hire American workers, investment in domestic supply chain resilience, and allied cooperation.
With these principles, equity stakes become a disciplined tool, not a blank check. Trump’s proposed deals with Intel, Nvidia, and AMD are controversial, but they force a necessary rethink of how the U.S. manages strategic industries. A pragmatic modernization of the military-industrial model; one that protects national security and gives taxpayers a rightful stake in the future economy is the right way forward.