✋ What are the limits to Trumpian state capitalism?
Intel inside the president's personal dealbook. Who's next?
My fellow pro-growth/progress/abundance Up Wingers,
In Washington, occasional efforts at industrial policy (of which I'm highly skeptical as a baseline) usually take shape through length and deliberate congressional bargaining. But nationalist populists are people of unilateral action! In Donald Trump’s second term, these interventions — with ever-evolving justifications — are being crafted at warp speed in the Oval Office.
The president’s impulsive decision to demand conversion of nearly $9 billion of promised subsidies into a 10 percent government stake in Intel strikes me as less a careful national strategy than an expression of his own taste for deal-making. He likes equity. He likes leverage. And he clearly wants more. That, even if it his ersatz, ad hoc, bespoke version of state capitalism is contrary to the fundamental nature of the American market-based economic system.
The Intel episode unfortunately highlights a broader trend in Trumponomics, one that looks a lot like something one would expect to emerge from the progressive left or authoritarian countries. After publicly pressuring Intel’s new boss, Lip-Bu Tan, to resign over his China links, Trump quickly reversed course and struck an agreement that made Washington the company’s biggest shareholder. The administration has taken similar steps elsewhere: a “golden share” in Japan’s Nippon Steel as a condition for buying US Steel, revenue-linked deals with Nvidia and AMD to approve chip exports to China, and even a Pentagon stake in rare-earth producer MP Materials.
Officials have signaled there may be more such transactions ahead. From The Wall Street Journal: “The president had already grown intrigued by the idea of government stakes in key industrial companies during his May trip to the Middle East, a senior White House official said. Though the official added that wasn’t what sparked Trump’s post, the president wants to see more such deals in the future.”
There you go. The Intel decision and these previous moves are less a coherent doctrine of predictable policymaking than a president’s idiosyncratic view of economic statecraft — that the United States should literally own pieces of firms it considers strategic based pretty much on Trumpian vibes. Perhaps the goal here is to, piece by piece, create a de facto sovereign wealth fund controlled by Trump.
In Intel’s specific case, the consequences of this intervention are immediate. A poison-pill clause makes any attempt to exit its money-losing manufacturing arm more costly. Existing investors have been diluted without the benefit of fresh customers or free cash flow. And now the ebb-and-flow of American politics and Trump’s whims are fully baked into corporate strategy, with reports that Washington is leaning on potential clients like Apple and Nvidia to consider sourcing from Intel.
More on how policy as politics might play out via the WSJ editorial page:
There are also practical risks. Suppose Intel announces layoffs in an election year. Will Washington look as if it is profiting from job cuts? When policymakers set semiconductor strategy, will they be doing so as national stewards or as corporate shareholders? And will South Korea’s Samsung and Taiwan’s TSMC—now both essential partners in U.S. manufacturing—see a level playing field if Intel is a government-owned competitor? Where does this new model of state capitalism stop?
Analysts caution that the deal is only a win, by Trump’s terms, if it secures anchor customers for Intel’s advanced chipmaking processes. Seems like a stretch given the company’s chronic troubles. Otherwise, Intel ends up in an even worse bind: financially weaker, strategically constrained, and entangled with government agendas.
The presidential precedent is certainly troubling, to say the least. Once one American company receives this treatment, every “strategic” industry can make its case — autos, batteries, artificial intelligence. And what recipients of past government largesse might be next? Indeed, what are the limiting principles here? Good question! I doubt the president or knee-jerk defenders have thought much about that.
Meanwhile, as I wrote the other week, “Tariffs, subsidies, and presidential fiat have become the main levers of what Wall Street Journal columnist Greg Ip calls ‘state capitalism with American characteristics.’” True then, even more so today.
Intel’s decline is well documented: It missed the smartphone revolution, fell behind in AI, and is burning cash in manufacturing. The cure will come from market discipline, not federal ownership and oversight. Trump insists his signature on the deal will help “make Intel great” again. More likely, it locks the company into a politicized safety net shaped by his own peculiar and mercurial deal-making instincts.
Final point: Trump totally misunderstands what the return on investment of US subsidies to Intel is supposed to be. Consider: America’s postwar science model never sought royalties or equity from federally backed research. The return has come indirectly — mainly through the benefits of that science, such as medical treatments — by moving discoveries quickly into private hands. Chips Act funds were meant to do the same for semiconductors. The primary goal is greater industrial resilience for national security reasons.
Here, Trump risks mistaking a public-good investment for a personal deal. But for him, this bug is a feature.
On sale everywhere: The Conservative Futurist: How To Create the Sci-Fi World We Were Promised by James Pethokoukis
Micro Reads
▶ Economics
Uncle Sam Shouldn’t Own Intel Stock - WSJ Opinion
Revenge of the meat bags - Axios
Recent College Grads Bear Brunt of Labor Market Shifts - St. Louis Fed
Fear the deficit-populism doom loop - Economist
▶ Business
The power shift inside OpenAI - The Verge
AGI talk is out in Silicon Valley's latest vibe shift, but worries remain about superpowered AI - Fortune
Is Roblox Getting Worse? - Wired
▶ Policy/Politics
Silicon Valley Launches Pro-AI PACs to Defend Industry in Midterm Elections - WSJ
▶ AI/Digital
How ChatGPT Surprised Me - NYT Opinion
Teens Are Using Chatbots as Therapists. That’s Alarming. - NYT Opinion
U.S. Tech Legislative & Regulatory Update – 2025 Mid-Year Update - Inside Global Tech
▶ Clean Energy/Climate
AI Is Booming. So Are Household Electricity Bills. - Bberg Opinion
▶ Robotics/Drones/AVs
▶ Space/Transportation
▶ Up Wing/Down Wing
Why Gen Z Is Resurrecting the 1990s - NYT Opinion
▶ Substacks/Newsletters
No country for young families - The Argument
Europe's crusade against air conditioning is insane - Noahpinion
A Climate-Related Financial Risk Boondoggle - The Economodernist
The future of work is playing a videogame - Strange Loop Canon
Does the Invisible Hand Work For Honor, Too? A Thought from Montesquieu - Conversable Economist
▶ Social Media
On national security and competence in government - @Miles_Brundage
On GPT-5 Pro claim tracker - @petergostev
On AI prompt energy usage - @emollick
Medicare for All by owning 20% of every health insurance company was not on my scorecard.
Now do the U.S. Postal Service.