The Donald Trump Administration Purchased Stakes in Intel, MP Materials, Lithium Americas, and Trilogy Metals -- and It Sets a Dangerous Precedent

Motley Fool

Oct 19

The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average have all hit new highs in 2025 -- and even the federal government is benefiting from it. President Trump's administration has ...

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Recently, the widely followed S&P 500 (^GSPC 0.53%), growth-fueled Nasdaq Composite (^IXIC 0.52%), and iconic Dow Jones Industrial Average (^DJI 0.52%) all hit fresh record highs.Investors who've stayed the course and remained optimistic have demonstrably benefited -- and this now includes the federal government.While the U.S. government has, on rare occasions in the past, dipped its toes into the pond as an investor, President Donald Trump's administration is breaking the mold, and not necessarily in a good way.President Trump delivering remarks. Image source: Official White House Photo by Shealah Craighead, courtesy of the National Archives.During the financial crisis, the Troubled Asset Relief Program, better known as TARP, allowed the Treasury Department to establish equity stakes in troubled financial institutions. Meanwhile, during the COVID-19 pandemic, the U.S. Treasury received stock warrants from some major airlines as partial compensation for the financial assistance they were provided.The Trump administration has taken equity stakes in four public companies without there being a financial emergency, which is both unique and a potentially dangerous precedent.President Trump's administration has invested in four skyrocketing stocksThe highlight of the Trump administration's investing foray is undoubtedly its $8.9 billion stake taken in semiconductor behemoth Intel (INTC 0.47%). Though Intel had already been granted funds from the U.S. CHIPS and Sciences Act (it had received $2.2 billion, as of Aug. 22), the remaining $5.7 billion in grants, coupled with $3.2 billion awarded to the company via the Secure Enclave program, were converted to an investment in Intel's common stock. This works out to a 9.9% stake in the company.Additionally, the Trump administration received a five-year warrant that allows for the purchase of an additional 5% of Intel's outstanding shares at $20/share if Intel's ownership in its foundry business falls below 51%.The purpose of this investment is simple: The president and his administration want chip production to occur in the U.S. and not overseas. This capital should help fuel Intel's foundry ambitions, where it aims to become the world's No. 2 chip fabricator.But Intel is just the tip of the iceberg, with the Trump administration investing in three other publicly traded companies.On July 10, rare-earth metals producer and processor MP Materials (MP -3.64%) announced a complex, multibillion-dollar deal with the U.S. Department of Defense (DOD) that saw it become the company's largest shareholder. The investments made by the DOD will seed the construction of a second magnet manufacturing facility in the U.S., which is expected to open in 2028.Furthermore, the DOD established a 10-year offtake agreement to purchase all magnets from this new facility, once complete, as well as set a price floor commitment of $110 per kilogram for MP Materials' neodymium-praseodymium oxide production. This investment is a direct attempt to keep China from accessing even more rare-earth metals.In early October, the U.S. Department of Energy (DOE) announced it would take a 5% stake in Lithium Americas (LAC -8.12%), which operates one of the world's largest lithium mines in Nevada. The DOE is also taking a 5% stake in a joint venture between Lithium Americas and General Motors for the Thacker Pass lithium mine, also located in the Silver State.Lithium is a necessary metal used in next-generation batteries found in smartphones and electric vehicles.Lastly, on Oct. 6, metals and minerals miner Trilogy Metals (TMQ -9.15%) announced a $35.6 million investment from the Department of Defense, which Trump in early September rebranded the Department of War. Trilogy, a Canadian-based mining company, holds a 50% interest in Ambler Metals, which has total control of the Upper Kobuk Mineral Projects in Alaska.The government will purchase more than 8.2 million shares of Trilogy at $2.17/share for a cost of approximately $17.8 million, as well as receive 10-year warrants that can further increase its stake.Image source: Getty Images.Federal government ownership of stocks can be a slippery slope for Wall Street and investorsOn the surface, the federal government taking equity stakes in publicly traded companies would appear to be fantastic news. From afar, it exudes confidence in the domestic semiconductor industry and looks to be a viable attempt to ensure that America can secure rare-earth metals at attractive prices in the future.But all is not what it appears if investors dig beneath the surface.In 2012, Congress passed, and then-President Barack Obama signed, the Stop Trading on Congressional Knowledge (STOCK) Act into law. The STOCK Act was designed to stop members of Congress and leading government officials from placing stock trades with inside information. Under this act, members of Congress and leading government officials are required to publicly report their trades in excess of $1,000 no later than 45 calendar days following a transaction.Despite the STOCK Act becoming law, eyebrow-raising trades continue to be made by members of Congress who help establish the laws that directly impact the companies they're investing in.Take this potential conflict of interest and magnify it 100-fold, and you have the dangerous precedent being set by the Trump administration's investments in Intel, MP Materials, Lithium Americas, and Trilogy Metals.Even though U.S. Commerce Secretary Howard Lutnick assured investors in an interview with CNBC (prior to his administration taking a stake in Intel) that any stakes taken would be nonvoting for the U.S. government, this doesn't mean the Trump administration doesn't exert sway over the boards and executive teams at these four companies.In addition to Congress crafting the fiscal policy and laws that can directly impact these businesses, President Trump has demonstrated a willingness to use U.S. businesses and/or products as bargaining chips for his tariff and trade policy demands.To add fuel to the fire, it's a stretch to say that all four of these public companies needed capital from the Trump administration.For example, Intel had already been granted $7.86 billion from the CHIPS Act, and has generated over $10 billion in cash flow from its operations over the trailing-12-month period. It wasn't hurting for capital, but had its hands tied by the federal government altering the nature of its remaining CHIPS Act grants.While the investments we've witnessed in Intel, MP Materials, Lithium Americas, and Trilogy Metals have sent these respective stocks soaring in recent months, they aren't cause for cheer from Wall Street or investors.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"shareholding","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"}}}