Intel Exposes the Hidden Cost of State Capitalism

The stocks of rare earth companies soared Monday following news that the Trump administration had taken a 10% stake in Oklahoma mining and magnet company USA Rare Earth Inc. Such is the visible benefit enjoyed by the growing number of firms that count Uncle Sam as a shareholder. Yet recent events surrounding perhaps what is the most well-known state-picked champion, Intel Corp., exposed a major unseen cost of the federal government’s unprecedented intervention in private business: the distortion of capital markets that have underpinned American growth and innovation since its founding.

Prior to Intel’s January 22 call with analysts and investors to discuss its quarterly results, the Santa Clara, California-based semiconductor maker had been on a winning streak. Since the Trump administration announced in August that the government would take a 10% stake in the troubled company, its share price more than doubled, and it reached multibillion-dollar deals with SoftBank Group Corp. and Nvidia Corp. Speculation rose of contracts withApple Inc. and other tech heavyweights – essential for Intel’s advanced semiconductor foundry business and sparking optimism that the long-promised turnaround was underway.