CSIS - Center for Strategic and International Studies Inc.
02/12/2026 | Press release | Distributed by Public on 02/12/2026 10:10
Understanding Federal Equity Investments in Strategic Companies
Understanding Federal Equity Investments in Strategic Companies
Photo: Sergii Figurnyi/Adobe Stock
Commentary by Sujai Shivakumar, Charles Wessner, and Christina Tutino
Published February 12, 2026
Introduction
The Trump administration has marked a significant shift in U.S. industrial policy. In addition to providing subsidies such as loans and grants, the Trump administration, in its second term, is now acquiring equity stakes in private companies in sectors deemed critical to national security. The U.S. government is now a direct shareholder in private companies, moving beyond traditional market-based approaches to competitiveness that have marked U.S. policy in the postwar period.
So far, $10 billion in federal funds has been committed in exchange for equity stakes in private firms, although most of that sum is associated with the "investment" in Intel. Seen more broadly, the Trump administration is acquiring a strategic portfolio of investments in companies directly related to national security, spanning minerals, nuclear energy, and semiconductors, among other sectors. These equity positions aim to support key U.S. firms and thus reduce U.S. dependence on China, help reshore critical manufacturing and provide reputational and financial support for innovative domestic firms. At the same time, equity held by the government when not sufficiently constrained can also pose risks, potentially including the politicization of corporate decisionmaking.
Equity Stakes and Their Historical Precedents
An equity stake represents ownership in a company and entitlement to the company's future profits. Unlike loans that must be repaid or grants which in principle are given freely-though often with conditions and "milestones"-an equity stake can generate financial returns for the government if it is profitable and, depending on the terms of the investment, may give the government a say in the company's decisionmaking.
In practice, if the government has a 10 percent equity stake in a company, it has 10 percent ownership of the company and a proportional claim to the company's profits and assets. Most deals are structured much more complexly than this.
Historically, direct U.S. intervention in the economy has come at times of opportunity or crisis. In the nineteenth century, the opportunity represented by the new railway technology and the pressing national security risks to the Union related to the Civil War encouraged the Lincoln administration to make repeated investments to support the construction of the U.S. rail system across the continent. The support was "limited" to repeated capitalization, rewards for track laid, support for the recruitment of labor on both the East (predominantly Irish workers) and the West Coast (predominantly Chinese workers), and the generous allocation of land on either side of the new railway backed by the U.S. Army. Perhaps more relevant today is the precedent set when the U.S. Navy and the Department of Justice required Westinghouse Electric Company, General Electric, and Marconi Wireless to pool their patents, enabling the creation of the Radio Corporation of America (now, CA).
In the post-World War I period, the government provided a regulatory framework with the Air Mail Act of 1925, along with a variety of incentives to help drive mail delivery by aircraft. This had a major impact on the growth of the nascent aircraft industry. The industry's progress was reflected in the 1930s with successful U.S. Army contracts for the four-engine, all-metal B-17 bomber. With the advent of World War II, the government launched massive state procurement programs to shift the automotive, aircraft, and shipbuilding industries to focus on wartime production. As noted, a more recent and powerful intervention occurred during the 2008 financial crisis, when the government provided major public support to the financial, automobile, and insurance sectors, which successfully helped prevent economic collapse.
A New Proactive Approach
The difference between today and 2008 is that the Trump administration's decision to take an equity stake in private companies deemed strategic is not a bailout but a proactive investment to secure, or at least support, U.S. capabilities in critical sectors and prevent further reliance on supply chains anchored in China. One could argue that it is a defensive move that simply seeks to ensure that the United States is not completely dependent on China's mines, processing, and supply. As an activist approach, it is designed to generate a parallel supply chain that can assure the minimum needs of the United States and those of its allies.
Which Sectors Are Being Prioritized?
- Semiconductors: The largest U.S. government investment by far is in semiconductors, with an $8.9 billion stake in Intel, in effect a conversion of the 2022 CHIPS and Science Act grant to that company into an equity position. It nonetheless represents an endorsement of the key role Intel may play as the only U.S.-headquartered company capable of producing advanced semiconductor chips. While U.S. firms have a strong lead in the design of advanced chips, U.S. companies such as Nvidia and Qualcomm depend on Taiwan's TSMC to manufacture their chips. Currently, over 90 percent of the world's most advanced semiconductors are manufactured in Taiwan, reflecting TSMC's unique capabilities but also representing a major chokepoint for the global supply chain. The U.S. government has not taken an equity stake in Nvidia or chipmaker AMD. Instead, it receives a portion of the revenue from their chip sales to China, and, in exchange, allows these companies to sell certain chips to China. While these are not equity stakes, they have the potential to generate profit for the U.S. government, similar to an equity stake.
- Critical Minerals: The Trump administration has responded to U.S. dependence on China for critical materials with diversified investments in several mineral companies, covering mining, processing, and recycling. The United States imports 72 percent of its rare earth elements from China, which are vital to nearly every defense system. Currently, China dominates over 90 percent of refining and a significant portion of extraction, despite other nations holding large deposits. This near-monopoly stems from China's focus on building integrated supply chains (mining, refining, and magnets) while the West reduced domestic capacity, creating supply chain vulnerabilities. To address this vulnerability, the federal government has taken a 15 percent stake in MP Materials, making the Department of Defense the largest shareholder. MP Materials is the United States' "only fully integrated rare earth producer with capabilities spanning the entire supply chain," and operates the United States' sole rare earth element mine.
- Nuclear Energy: The Trump administration has identified nuclear energy as a core pillar of U.S. energy security and industrial capacity. In October 2025, the government signed an $80 billion deal with Westinghouse Electric Company, Brookfield Asset Management, and Cameco Corporation to begin construction on $80 billion worth of nuclear reactors by 2030. As a part of the agreement, the Trump administration will help facilitate financing, land acquisition, permitting, and reduce regulatory challenges. Expanding nuclear energy aims to address the rapidly rising electricity demand for AI and strengthen U.S. energy independence. The administration has also set ambitious targets for nuclear energy with a May 2025 executive order to expand U.S. nuclear energy from 100 gigawatts (GW) to 400 GW by 2050. This would require "10 new large reactors with complete designs under construction by 2030." The deal with Westinghouse Electric Company seeks to make these goals a reality.
Christina Tutino
Intern, Renewing American Innovation
Programs & Projects
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Trade-offs of the U.S. Government Taking Equity Stakes
These equity positions seek to lessen U.S. dependence on China, help reshore manufacturing, and provide support for innovative U.S. companies. Yet, if not constrained, they can also pose risks, including the potential politicization of corporate decisionmaking.
Pros
Strengthens National Security and Supply Chain Resilience: An equity stake is one tool to allow the government to directly support firms in sectors where reliance on foreign suppliers-especially China-poses strategic vulnerability. This is particularly relevant for semiconductors and critical minerals, which are vital to both technology and defense systems.
Provides Capital and Liquidity: Many of these sectors-critical mineral processing, advanced semiconductor manufacturing, and nuclear energy-require very large amounts of capital as well as new infrastructure to execute long-term projects (e.g., reshoring). Government investment can help meet these capital needs, lowering risk and attracting private investors, thus providing support to industries crucial to national security-especially in sectors that are not currently economically viable, not least due to the industrial policies of U.S. competitors.
Signals Market Confidence That Can Attract Private Investment: U.S. equity stakes in private companies signal to investors that the company is a strategic asset to the United States, which may catalyze private investment. For example, since the enactment of the CHIPS and Science Act in 2022, over $450 billion in private investment has gone toward rebuilding domestic semiconducting manufacturing capabilities.
Maintains Competitiveness in Global Markets: U.S. firms increasingly compete against firms backed by strong industrial policies and government support-this is the case with China, South Korea, and Japan. Equity stakes in U.S. companies may help the United States to stay competitive in the global economy through the provision of more patient capital and political support.
Potential Financial Returns: These equity stakes and investments could potentially generate returns for the U.S. government if they are successful. This would offset the original cost of the investment to taxpayers, as with the highly successful "bailout" of the U.S. automotive industry in 2008.
Cons
Risk of Private Sector Politicization: With an ownership stake, the government may be able to exert influence over a company's strategic direction, potentially forcing decisions that are not in the best long-term financial interest of the company or its shareholders (but may better serve national policy objectives). Although the Intel deal is structured as passive ownership, with no board representation, questions remain about the Department of Commerce's potential influence going forward. There are also potential conflicts between the role of the government as an investor in a particular company and its role as a regulator (e.g., regarding export controls) of firms across the wider industry. Government equity positions may also create political dilemmas if the firm in question were to fail. For example, Republicans took advantage of the failure of Solyndra with its Department of Energy loan guarantee to bludgeon the Obama administration for its "industrial policy" failures, while ignoring the success of the loan guarantees to Tesla under the same program.
Risk of Cronyism: Cronyism refers to the "practice in which particular businesses receive preferential treatment from government authorities, often to the benefit of politicians" (or their friends and family). This preferential treatment could be in the form of advantageous loans or contracts, focused tax credits, or equity stakes on favorable terms. This may distort competition, stifle innovation, and potentially lead to monopolies or market concentration in strategic sectors. Furthermore, the selection process itself for equity stakes may erode public confidence if the choices seem to be driven by political connections rather than strategic merit.
No Guarantee of Success: Like any investment, there are substantial risks and no guarantee of success or profitability when the government takes an equity stake. Indeed, mixed ownership can lead to further instability when the owner's interests are not aligned. Intel is not yet competitive with TSMC despite being a beneficiary of a grant from the CHIPS and Science Act, but its capital and market position have improved. Perhaps this is partly due to the government's equity stake in the company, which was followed by substantial private investment. Still, capital alone cannot resolve the issues facing the company, particularly the uptake of its latest chips by major companies and improvements in its foundry business. Equity stakes might signal confidence, but they do not ensure success, though they may well facilitate success.
Conclusion
The move by the U.S. government to take equity stakes in private companies is a recognition of the reality of current dependencies created by China's chokehold on the supply chain in critical sectors. The willingness to take activist measures to reduce those dependencies has a rationale at the strategic, economic, and national security levels.
While government equity stakes can be a pragmatic tool, the terms of their implementation are vital. In the case of Intel, the government currently holds a 9.9 percent equity stake but has no seat on Intel's board of directors and has agreed to vote its shares in alignment with the company's board on most matters. These conditions at present temper the fear of some critics about undue government influence and doubts about the government's capability for active management of a company in a highly dynamic market environment. Looking to the future, these considerations need to be addressed upfront, in addition to the articulation of a clear economic and national security rationale for deploying this tool.
Fundamentally, the decision to inject public capital reflects a realization that, without such capital, in some strategic, capital-intensive sectors, profit-oriented U.S. companies are unlikely to be able to compete with publicly supported loss-absorbing foreign firms. It also reflects, however belatedly, the realization that the competition faced by U.S. companies in minerals, microelectronics, and elsewhere is often driven by well-funded industrial policies, most notably China's, which by its scale and the breadth of its objectives poses strategic challenges of an unprecedented nature.
Sujai Shivakumar is the director and senior fellow of Renewing American Innovation at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Charles Wessner is a senior adviser (non-resident) for Renewing American Innovation at CSIS. Christina Tutino is an intern for Renewing American Innovation at CSIS.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2026 by the Center for Strategic and International Studies. All rights reserved.
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CSIS - Center for Strategic and International Studies Inc. published this content on February 12, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on February 12, 2026 at 16:10 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]