U.S. Strategic Equity Investments in Critical Tech: Mitigating Geopolitical Risks and Building Portfolio Resilience

In an era of escalating geopolitical tensions and supply chain fragility, the U.S. government has adopted a bold strategy of strategic equity investments in critical technology firms to secure national security and economic resilience. From 2023 to 2025, the administration has shifted from passive subsidies to direct ownership stakes in key sectors, including semiconductors, rare earths, and battery materials. This approach reflects a broader industrial policy aimed at reducing reliance on adversarial nations like China while fostering domestic innovation.

U.S. Strategic Equity Investments: A New Industrial Paradigm

The Trump administration's equity-driven strategy has targeted firms pivotal to critical technology supply chains. For instance, the Department of Defense now holds a 15% stake in MP Materials, the sole rare earths miner in the U.S., and a 9.9% stake in Intel Corp, signaling a commitment to bolstering domestic semiconductor manufacturing, according to a US News factbox. Similarly, a 5% stake in Lithium Americas and the Thacker Pass lithium joint venture with General Motors underscores efforts to secure raw materials for electric vehicle batteries, the US News factbox reports. These investments are not merely financial but strategic, embedding the government as a long-term partner in reshaping supply chains.

The Office of Strategic Capital (OSC), established under the Department of Defense, has further institutionalized this approach. Its FY25 Investment Strategy prioritizes credit-based financial products for critical technologies, focusing on 31 technology categories, including semiconductor manufacturing and additive production, per the OSC investment strategy. By aligning corporate objectives with national security imperatives, the U.S. aims to create a self-sufficient industrial base capable of withstanding geopolitical shocks.

Geopolitical Risk Mitigation: Lessons from Global Competitors

The U.S. strategy mirrors but diverges from approaches taken by China and the EU. China's state-led financialization model, as analyzed by an Oxford analysis, leverages state-owned enterprises (SOEs) and bank wealth management companies to fund high-tech sectors like AI and semiconductors. Meanwhile, the EU's push for strategic autonomy-evidenced by its semiconductor and rare earths investments-reflects a recalibration of its relationship with China, now viewed as a "systemic rival," as discussed in a PMC article.

The U.S. approach, however, emphasizes direct equity stakes and industrial partnerships. For example, the administration's minerals deal with Ukraine and discussions to acquire an 8% stake in Critical Metals for Greenland's Tanbreez deposit illustrate a "friendshoring" strategy to diversify supply chains, the US News factbox notes. This contrasts with China's reliance on state-directed capital and the EU's hybrid model of public-private collaboration.

Portfolio Resilience: Quantifying the Impact

The effectiveness of these investments is evident in both qualitative and quantitative metrics. The Xtrackers US National Critical Technologies ETF (CRTC), launched in November 2023, exemplifies how strategic equity allocations can mitigate geopolitical risks. By screening out companies vulnerable to high-risk nations and focusing on the 14 critical technologies identified by the DoD, CRTC has delivered a 14.91% total return as of March 31, 2025, according to an ETF.com analysis. Its 10-factor model, which assesses geopolitical risk across governance, operations, and commercial categories, has enabled investors to avoid exposure to volatile regions, ETF.com notes.

Meanwhile, stress-testing by the Atlantic Council highlights the economic stakes. A simulated ban on Chinese exports of neodymium and dysprosium-critical for magnets in electric vehicles-could reduce U.S. GDP by $1.6 billion, according to an Atlantic Council brief. Such scenarios underscore the urgency of diversifying supply chains, a goal the U.S. is addressing through equity investments and international alliances.

Challenges and the Path Forward

Despite progress, structural challenges persist. The U.S. remains reliant on imports for minerals like lithium and graphite, with domestic production projected to meet demand for only a fraction of key materials by 2035, according to a Carnegie Endowment analysis. To address this, the administration has combined domestic initiatives-such as the One Big Beautiful Bill Act (OBBBA), which allocates $2 billion for National Defense Stockpile purchases-with international partnerships. For example, the minerals deal with Saudi Arabia and the UAE aims to secure alternative sources of critical materials, the Carnegie analysis adds.

For investors, the lesson is clear: strategic equity investments in critical technologies must be paired with a diversified, global approach. While the U.S. has made strides in reducing vulnerabilities, long-term resilience requires innovation, regulatory agility, and sustained international collaboration.

Conclusion

The U.S. strategic equity investment model represents a paradigm shift in how nations manage geopolitical risk and portfolio resilience. By embedding itself in critical technology supply chains, the government has not only secured its economic and military interests but also provided a blueprint for investors seeking to navigate an increasingly fragmented global landscape. As the CRTC ETF's performance demonstrates, aligning portfolios with national security priorities can yield both strategic and financial returns. However, the road ahead demands continued innovation, adaptability, and a willingness to confront the complex interplay of geopolitics and economics.