The legal basis for taking equity stakes in firms like Intel is not explicit authorization. Instead, the administration relies on the fact that laws like the CHIPS Act don't expressly forbid it, coupled with the low likelihood of a legal challenge from the benefiting companies.
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The Trump administration's strategy for control isn't writing new authoritarian laws, but aggressively using latent executive authority that past administrations ignored. This demonstrates how a democracy's own structures can be turned against it without passing a single new piece of legislation, as seen with the FCC.
The fastest path to generating immense wealth is shifting from pure innovation to achieving regulatory capture via proximity to the president. This strategy is designed to influence policy, secure government contracts, or even acquire state-seized assets like TikTok at a steep discount, representing a new form of crony capitalism.
The U.S. is shifting from industry supporter to active owner by taking direct equity stakes in firms like Intel and U.S. Steel. This move blurs the lines between free markets and state control, risking a system where political connections, not performance, determine success.
When facing government pressure for deals that border on state capitalism, a single CEO gains little by taking a principled stand. Resisting alone will likely lead to their company being punished while competitors comply. The pragmatic move is to play along to ensure long-term survival, despite potential negative effects for the broader economy.
When the U.S. government becomes a major shareholder, it can create significant challenges for a company's international operations. Foreign governments and customers may view the company with suspicion, raising concerns about data privacy, security, and its role as a potential tool of U.S. policy.
Despite populist rhetoric, the administration needs the economic stimulus and stock market rally driven by AI capital expenditures. In return, tech CEOs gain political favor and a permissive environment, creating a symbiotic relationship where power politics override public concerns about the technology.
Historically, the U.S. government has only taken equity in private firms during bailouts with the goal of exiting quickly. Recent deals with companies like Intel represent a new strategy of long-term investment to bolster specific industries, a marked departure from past policy.
As part of its equity deal with Intel, the U.S. government has agreed to vote its 9.9% stake according to the board's recommendations. This arrangement effectively hands the board a powerful, stable voting bloc, insulating management from shareholder activism and reinforcing the existing power structure.
The government's equity stake in Intel replaced a milestone-based grant system. This delinks the funding from specific performance targets, like building fabs, converting the deal into a higher-risk bet on the company's overall success rather than a payment for specific outcomes.
The current market boom, largely driven by AI enthusiasm, provides critical political cover for the Trump administration. An AI market downturn would severely weaken his political standing. This creates an incentive for the administration to take extraordinary measures, like using government funds to backstop private AI companies, to prevent a collapse.