The US government has made an unusual move into the stock market, taking equity stakes in companies it sees as strategically important. Semiconductors have been a major part of that strategy.
But so far, some of those bets have been far more volatile than the broader chip sector.
Four Trump-backed chip stocks have fallen sharply
Over the past six months, four publicly traded semiconductor companies with US government backing have suffered losses of at least 40%:
- Intel (INTC)
- GlobalFoundries (GFS)
- Aeluma (ALMU)
- Wolfspeed (WOLF)
That is a much steeper decline than the broader semiconductor market.
The PHLX Semiconductor Index, which tracks major semiconductor companies, is down roughly 18% over the same period .
The gap is important. These companies are not simply moving with the rest of the chip industry. Their individual businesses, financial positions and exposure to the current technology downturn are playing a much bigger role.
Intel is the biggest headache
Intel is perhaps the most visible example.
The US government took a stake in the chipmaker as part of the Trump administration’s push to strengthen domestic semiconductor manufacturing.
But Intel’s share price has fallen significantly from the levels seen earlier this year.
That decline has also reduced the value of the government’s stake by roughly $20 billion , according to the report.
There is an important detail here, though.
Even after the recent sell-off, Intel is still trading above the price at which the government acquired its shares.
So the investment has not necessarily turned into a realised loss for taxpayers.
But the decline has made the government’s semiconductor strategy much harder to ignore.
Trump had previously highlighted Intel’s much higher share price when discussing the government’s investments. With the stock now trading around the mid-$50s, that earlier optimism looks considerably less convincing.
The other chip bets have struggled even more
Intel isn’t the only government-backed semiconductor investment facing pressure.
GlobalFoundries, Aeluma and Wolfspeed have all fallen at least 40% over the past six months.
That compares with a decline of around 18% for the semiconductor index.
In other words, investors have been far more cautious about these individual companies than about the chip sector as a whole.
There are different reasons behind each company’s performance, but the broader environment has not helped.
Semiconductor stocks have been dealing with:
- Heavy expectations around AI and chip demand
- High valuations in parts of the sector
- Concerns about capital spending
- A broader technology-sector pullback
- Questions about how quickly some companies can turn investment into profits
For smaller and more financially challenged chipmakers, those pressures can be amplified.
Friday’s rebound doesn’t erase the losses
There was some relief for chip investors on Friday.
All four of these stocks were up more than 5% around midday, with some gaining double digits as semiconductor stocks bounced.
The broader semiconductor index also climbed roughly 4%.
But one strong trading session doesn’t change the bigger picture.
A stock that has fallen 40% or more can easily jump 5% or 10% during a rebound without reversing the damage from months of declines.
That’s why the bigger question for investors is not whether these stocks can bounce.
It is whether they can build a sustainable recovery.
Washington is becoming a shareholder
The bigger story goes beyond these four stocks.
The Trump administration has been building a government investment portfolio across strategically important industries.
According to a Cato Institute tracker cited in the report, the portfolio covers 41 companies , spanning areas such as semiconductors, critical minerals and drones.
Semiconductors have received particular attention because the US wants greater domestic control over a supply chain that has become strategically important.
The administration has used funds made available through the CHIPS and Science Act to negotiate equity stakes in semiconductor companies.
Some of these companies are private, meaning their performance isn’t visible through daily stock prices.
Others are publicly traded, giving investors a real-time view of how the market is valuing them.
And right now, that market verdict is mixed.
The government’s chip strategy goes beyond Intel
The government’s semiconductor exposure isn’t limited to the four publicly traded names.
The administration has also negotiated stakes in private chip companies, including Commonwealth Fusion Systems and xLight .
That makes the overall portfolio much broader than what investors see on the stock exchange.
The government has also taken positions in quantum computing companies.
Publicly traded names in that group include:
- D-Wave Quantum
- Infleqtion
- Quantinuum
- Rigetti Computing
These companies have also faced significant volatility as investors have reassessed parts of the technology sector.
So the government’s investment strategy is increasingly becoming a test of whether public capital can successfully pick and support companies in some of the world’s most competitive technology industries.
This raises a bigger question for taxpayers
Government ownership of companies is not new.
But the scale and visibility of these recent investments have created a new debate.
The argument from the administration is straightforward: if the US government is going to spend billions supporting strategically important industries, taxpayers should potentially benefit from the upside as well.
The criticism is equally straightforward.
Should the government really be picking individual companies and taking equity positions in them?
Critics argue that governments are not necessarily better positioned than private investors to decide which companies will ultimately succeed.
The report also points to economic research and a 2025 survey of economists, in which a large majority said government equity ownership tends to be harmful to company performance and governance.
That doesn’t prove that every government investment will fail.
It does, however, highlight the risks involved when public money becomes directly exposed to individual companies.
The AI boom has made the timing even more interesting
There is another layer to this story.
Semiconductors have become one of the biggest beneficiaries of the AI investment boom.
That has pushed enormous amounts of capital toward chipmakers, data-centre companies and related technology businesses.
But the AI trade has also created extremely high expectations.
Investors are no longer simply asking whether a company is involved in AI.
They want to know:
- How much revenue is AI actually generating?
- Can the company compete with larger rivals?
- How much capital will it need?
- When will that investment translate into profits?
- Is the current valuation justified?
Those questions are particularly important for companies that require huge amounts of capital to expand manufacturing or develop new technologies.
A government portfolio is different from a normal investment portfolio
For an individual investor, a 40% decline in a stock can be a serious portfolio problem.
For the US government, the calculation is different.
The objective isn’t necessarily to maximise short-term returns.
The administration can argue that owning stakes in strategic companies serves a broader national purpose, such as strengthening domestic manufacturing, reducing dependence on overseas supply chains or supporting technologies considered critical to national security.
That means these investments shouldn’t be judged solely by whether a stock rises or falls.
But taxpayers still have a legitimate reason to ask whether the financial returns justify the risks.
Strategic policy and investment returns are two different things.
A company can be strategically important and still be a poor investment.
The real test is still ahead
The recent losses don’t necessarily mean the government’s semiconductor strategy has failed.
The chip industry is notoriously cyclical, and semiconductor stocks can move sharply in both directions.
Friday’s rally is a reminder of that volatility.
But the sharp underperformance of Intel, GlobalFoundries, Aeluma and Wolfspeed compared with the broader semiconductor index shows that government backing doesn’t automatically translate into market success.
For investors, the bigger question is what happens from here.
Can these companies turn government support into stronger businesses, stronger earnings and eventually stronger stock prices?
Or will taxpayers end up owning some of the most volatile names in an already unpredictable technology sector?
That is the part of the Trump administration’s chip bet that the market will be watching closely.