Editorial: No, the federal government should not take equity in private companies

A disturbing new policy has emerged under the Trump administration, one that runs counter to the free market: acquisition of equity stakes in private-sector companies.

Examples abound. In August 2025, President Donald Trump announced that the federal government had taken a 9.9% stake in Intel Corp., along with a five-year warrant to acquire another 5%.

In May, the U.S. Department of Commerce announced letters of intent with nine quantum-computing companies to receive $2 billion to accelerate the industry. The federal government will receive equity stakes in companies, including Atom Computing in Boulder, Infleqtion Inc. in Louisville and Quantinuum Inc. in Broomfield, in exchange for $100 million each.

Similar equity investments are also being made in rare-earth companies.

These industries are vital to national security and may well deserve federal support. The U.S. is too dependent on China for rare-earth materials, and advances in quantum computing, artificial intelligence and semiconductors are essential.

Federal equity investments traditionally have been reserved for extraordinary circumstances, such as the Great Recession bailouts of General Motors and AIG. In ordinary times, Washington has relied on contracts, grants, loans or tax incentives to encourage strategic industries.

Today’s investments are different, reflecting a new policy to maximize the federal government’s potential for profit.

But the pitfalls are many.

Private companies with the “big-brother” federal government as a significant shareholder might feel pressured to make business decisions because of political considerations. They might locate factories for political rather than business reasons. They could retain workers despite economic conditions, perhaps to the detriment of the company’s bottom line. And they could favor governmental rather than shareholder priorities.

Companies might also be willing to take greater risks if they believe the governmental shareholder might step in to rescue them if necessary.

Governmental equity investment can bring rewards if the stock price increases, but it also produces risk. Unlike a loan that will be repaid at a set interest rate, there is no guarantee that an equity investment will reap benefits.

And potential conflicts of interest abound. For publicly traded and private companies, the government would act simultaneously as the regulator, customer, grant-maker, tax collector and shareholder. This could figure prominently in actions such as antitrust enforcement, procurement decisions and countless other examples.

And what’s to stop the government from deciding to enter other sectors? Should it invest in beef or poultry producers? Should it take an equity stake in distressed retail enterprises?

This policy may begin with semiconductors, quantum computing and rare earths, but history suggests that government programs rarely remain narrowly defined. Once the federal government decides that owning pieces of private companies represents an appropriate economic tool, the temptation to expand the model will only grow.

A government committed to free enterprise should create the conditions for private companies to thrive — not compete with it.

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