For decades, American politicians have looked across the Atlantic at Europe’s experiments with state-directed industry with a mixture of pity and scorn. The French model of dirigisme, with its state-owned champions and politically guided investments, was often held up as a cautionary tale of bureaucratic meddling and economic sclerosis.
Yet, in a move that turns decades of free-market economics on its head, the United States government is now a leading shareholder in one of Silicon Valley’s founding giants. The agreement for Washington to take a nearly 10% stake in Intel is more than just a bailout for a struggling chipmaker; it is a striking symbol of a new era in American economic policy, one that bears an uncomfortable resemblance to the European state capitalism of the 1960s.
The deal itself, announced by President Donald Trump, is an extraordinary piece of political theatre and financial engineering. The 10% stake in Intel will not be funded bynew money, but through a clever conversion of funds already allocated to the chipmaker through the 2022 CHIPS and Science Act, which was designed to bolster domestic semiconductor manufacturing.
The current arrangement with Intel was born of a hurried rapprochement between the president and Intel’s chief executive, Lip-Bu Tan. Mr. Trump had previously called for Mr. Tan’s resignation over his prior investments in Chinese start-ups. After a meeting, however, the president’s tone changed dramatically.
It is a transactional, almost improvisational, approach to industrial strategy that has become a hallmark of the administration.
“I said, I think you should pay us 10% of your company. And they said ‘yes’ — that is about $10 billion,” Mr. Trump told about his interaction with Intel during an Oval Office press briefing on Friday.
“He walked in wanting to keep his job, and he ended up giving us $10 billion for the U.S.,” Mr. Trump said.
This is not Mr. Trump’s isolated venture. The White House has struck other unusual deals, including allowing Nvidia and AMD to sell certain AI processors to China on the condition that Washington receives a portion of the revenue. The Intel deal, however, marks the most significant direct equity stake in a major technology firm, prompting Mr. Trump to declare, “We do a lot of deals like that: I’ll do more of them.”
The parallel with 1960s Europe is compelling. Back then, governments in countries like France and Britain, alarmed by what was dubbed the “technology gap” with America, poured public money into creating “national champions” in strategic sectors such as computers and aerospace. The belief was that only the state had the deep pockets and long-term vision to build companies that could compete on a global scale. These policies, however, were largely unsuccessful, often resulting in uncompetitive, state-coddled firms that drained taxpayer funds and lagged in innovation.
Intel, once the undisputed king of semiconductors, now finds itself in a position that makes it a candidate for such state intervention. The company has been haemorrhaging money, posting a staggering operating loss in 2024, and has fallen technologically behind rivals like Taiwan’s TSMC. Its struggles to attract external customers for its manufacturing arm and delays in construction plans in states like Ohio have cast doubt on its turnaround strategy. This weakness made Intel uniquely receptive to Washington’s offer. Foreign competitors like TSMC and Samsung, which are also building factories in America with CHIPS Act subsidies, are far too successful and valuable to entertain ceding a significant equity stake to Uncle Sam.
So, this is not a case of the government picking a winner, but of preventing a national icon — and a critical node in the domestic semiconductor supply chain — from falling further into irrelevance.
However, there is a crucial distinction between this new American interventionism and its European precursor. The government’s investment is structured as a passive, non-voting ownership stake. Washington will have no seat on the board and no formal governance rights, and has agreed to vote with the company’s board on most shareholder matters.
This suggests a more sophisticated model than the heavy-handed state control of the past. The goal appears to be to provide vital capital and a government seal of approval, ensuring the taxpayer shares in any potential upside from a successful turnaround, without succumbing to the temptation of political meddling in day-to-day operations.
Nonetheless, the risks are profound. The line between a passive partner and an influential stakeholder can blur, especially if Intel’s troubles persist. Future administrations may not share the current hands-off approach. The government is now financially exposed to Intel’s performance, creating a dangerous precedent where corporate failures in strategic sectors become direct liabilities for the public purse. This move fundamentally alters the relationship between the state and private enterprise in a way that could introduce new and unpredictable forms of political and market risk.
America’s foray into shareholder activism is a reluctant one, born not of ideological conviction but of geopolitical necessity and the fierce technological rivalry with China. The long-held belief in the inherent superiority of the free market is giving way to a pragmatic, if uneasy, embrace of industrial policy.
The Intel stake is a bold experiment in this new reality. The critical question is whether America can learn from Europe’s past, deploying the power of the state to nurture a strategic industry without smothering the competitive spirit that made it a world leader in the first place. The American taxpayer now has $10 billion riding on the answer.
Published – August 23, 2025 01:01 pm IST
