The U.S. government recently acquired a 10% stake in Intel. President Trump and other officials have indicated that more such deals may be forthcoming.

Key Points

Recent business transactions by the Trump administration have prompted market observers to describe its strategy as "state capitalism" or "national capitalism." The latest case involves the U.S. government acquiring shares in Intel, but government officials and Trump himself have hinted at more similar moves ahead. Some investors interviewed expressed concerns about the White House's stance toward publicly traded companies, viewing such practices as seemingly "picking winners and losers"; other investors remain unfazed.

Regardless of how you view President Donald Trump's "hands-on" approach to publicly traded companies—or whatever you think this model should be called—the "Trump-style capitalism" he's promoting appears to be here to stay.

Trump has already taken action to demand a share of chip sales revenue from Nvidia (stock ticker NVDA) and Advanced Micro Devices (stock ticker AMD), and secured a "golden share" (shares with special voting rights) in the sale of U.S. Steel to Japan's Nippon Steel. Additionally, Trump previously took the unusual step of demanding that Intel (stock ticker INTC) fire its Chief Executive Officer (CEO), and shortly thereafter, Intel agreed last week to transfer 10% of the company's shares to the U.S. government in exchange for financial support.

More similar moves may be coming. Trump stated yesterday that he would "make such deals for the country around the clock." U.S. Commerce Secretary Howard Lutnick revealed on a CNBC program Tuesday that Defense Department officials are "considering" investing in defense companies; while National Economic Council Director Kevin Hassett said the government "potentially" seeks to acquire stakes in more companies.

The Trump administration claims that such deals with chip manufacturers are based on "economic security" and "national security risks." A White House spokesperson recently told Investopedia that Trump's campaign promise was to "take control of the initiative and rebuild the economic prosperity that Americans enjoyed during his first term."

Compared to "State Capitalism" or "National Capitalism"

Recently, some commentators and related parties believe that the United States is experiencing a trend toward "state capitalism" or "national capitalism"—essentially referring to the U.S. government's current tendency to establish unusually close ties with businesses and deeply intervene in capital flows.

Broadly speaking, "state capitalism" refers to a system where the state exercises control over business activities through state-owned enterprises or market intervention; this concept is sometimes confused with "state monopoly capitalism," which refers to a model where governments support businesses and their interests.

Governments worldwide, including the United States, often cooperate directly or indirectly with businesses and industries during emergencies, economic crises, and wartime, which can be said to deviate from pure free-market capitalist principles.

In recent years, previous U.S. administrations have also taken interventionist measures to support industries such as financial services and automotive. However, Greg Ip recently wrote that Trump's series of moves represent "a fundamental transformation compared to the free-market ideals that America once represented."

These moves have also triggered some perhaps unexpected political side effects. For example, Vermont Democratic Senator Bernie Sanders, who calls himself a "democratic socialist," expressed support for the basic idea that chip manufacturers should somehow repay U.S. government funding support; while Kentucky Republican Senator and libertarian Rand Paul called such practices a "bad idea."

How Do Investors and Analysts View This?

Some investors interviewed expressed concerns about the White House's stance toward publicly traded companies, viewing such practices as seemingly "picking winners and losers"; other investors remain unfazed. Mohamed El-Erian of Pacific Investment Management Company (Pimco) stated on a CNBC program that he is "concerned" the government might seek to play an active role in companies beyond its shareholding capacity. Mark Lehmann, CEO of Citizens JMP Group, called the Intel deal a "dangerous slippery slope" on a CNBC program.

Analysts point out that subsidies with conditions attached may not be as advantageous as previous unconditional funding support. Former U.S. Commerce Department officials Mike Schmidt and Todd Fisher recently wrote that the U.S. government's deal with Intel puts the company at a "cost disadvantage relative to peers" and does not address its most pressing problem—customer shortage.

Analysts speculate that other companies might refuse to accept similar conditional funding support. Intel itself also has concerns: the company stated in regulatory filings submitted last Friday that risks related to the government deal might include "legal litigation, tax and accounting uncertainties, equity dilution transactions for existing shareholders, reduction of shareholder voting rights and other governance rights, and potential negative impacts on its international business."