"I'm from the government, and I'm here to help," were what President Ronald Reagan repeatedly called the nine most terrifying words in the English language. In Reagan's day, the Republican party abhorred the idea of government intervention in private business. President Donald Trump's Republicans have apparently abandoned qualms about government intrusion, and seem to be pondering a central role for Washington in America's artificial intelligence revolution.
It feels almost quaint to recall when President Donald Trump, just weeks after winning the 2016 election, pressured the air conditioning company Carrier into canceling its plans to move some of its U.S.-based production to Mexico. In his second term, the government has already taken stakes in at least 10 private companies.
Some government interventions in private firms may be tolerable; most are simply wasteful and dull the competitive edge of U.S. industry. The deal reportedly under discussion right now between Trump and OpenAI CEO Sam Altman is worse still. If Altman hands the U.S. government a 5% stake in OpenAI, as the Financial Times reported July 1, the results could prove disastrous for the company, for taxpayers, and for America's lead in the global AI race.
There is little mystery why CEO Sam would be happy to give Uncle Sam a piece of his company. He is eyeing an initial public offering this year in a jittery market, and government reinforcement can only help. If the company's herculean, $60 billion fundraising plan suddenly hits an air pocket, taxpayers would step in. A government stake in OpenAI would also align with the company's recently published manifesto making the case for widely sharing the benefits of AI as the technology upends jobs and social structures. Cynics might also point out that a government stake would help ensure looming AI regulation won't pinch OpenAI's profits too much either.
But creeping state capitalism will slowly corrode America's competitiveness. The government's golden share in U.S. Steel may preserve current jobs under the company's new Japanese owners, but it will likely slow the modernization of American steel production. Securing a fee from Nvidia and AMD for their advanced chip sales to China may make a tiny contribution to closing the federal deficit, but it also shades American capitalism with the appearance of mob-style extortion.
The administration's decision to transform grants to Intel into a 9.9% equity stake is even more dubious. Trump has been touting a hefty paper profit as Intel's stock price shot up over the past few months, but taxpayers won't see that money unless the government sells its stake. That is hard to imagine. What is much easier to imagine is the government continuously pouring money into a national champion amid the cutthroat global competition for chip supply.
Government ownership of leading AI firms, however, would be a mistake of much greater proportions. Above all, it would place this administration and its successors at the center of an as-yet-unproven industry with balance sheets that look like ticking time bombs.
There is little guarantee that OpenAI, or another top U.S. AI company, will be winners when the dust settles. Even Altman and his peers admit they don't know what shape the industry will ultimately take. Building a business on closed-source models that require expensive tokens to access may succeed. But there is a growing chorus of skeptics, especially as China's DeepSeek has become available for roughly 4% of the cost for consumers.
China's subsidies give it near complete control of the world's critical mineral supplies, so the U.S. has little choice but to back a top U.S. rare earth miner or America's largest lithium mine. But that doesn't mean the U.S. government should jeopardize taxpayer dollars to benefit AI companies -- let alone contemplate more extreme measures. Vermont Sen. Bernie Sanders, for example, has proposed legislation for a sovereign-wealth fund that would own half of America's top AI companies.
Trump has suggested it might be beneficial if "the American public essentially becomes a partner with the companies." But no serious sharing of AI's benefits come from gains in the stock price. The government needs to focus all its efforts on sensible safety regulations and tax reform that will take the gains from AI wherever they appear to cover unemployment benefits and retraining programs. If the government must get involved, purists like me would prefer its support take the form of long-term purchase contracts or subsidized loans that provide an automatic exit, although these days that counts as quibbling.
It isn't a winning formula for any government to be a significant shareholder, a major customer and the principal regulator of this century's most transformative industry. Is there any more certain formula to undermine America's competitive edge and saddle taxpayers with extended losses?
Guest commentaries like this one are written by authors outside the Barron's newsroom. They reflect the perspective and opinions of the authors. Submit feedback and commentary pitches to ideas@barrons.com .
Christopher Smart is managing partner of the Arbroath Group, an investment strategy consultancy, and was a senior economic policy advisor in the Obama administration.
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July 09, 2026 16:22 ET (20:22 GMT)
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