Trump Administration Eyes Stakes in Defense Contractors, Stocks Surge

The United States Secretary of Commerce recently indicated that the Trump administration is exploring the possibility of acquiring stakes in major defense contractors and other industries. This revelation came in response to inquiries about whether the government would pursue similar arrangements with companies that conduct business with the government, including defense contractors, as it did with Intel.

The Secretary specifically highlighted Lockheed Martin, describing the company as "essentially an extension of the U.S. government." Lockheed Martin's 2024 fiscal year total revenue is projected to grow by 5% to 71 billion dollars, with approximately 73% of that revenue coming from the U.S. government. The Secretary noted that discussions about how to finance ammunition procurement are ongoing and that these matters are being handled by the Department of Defense.

This announcement had an immediate impact on the stock prices of major U.S. defense contractors. Lockheed Martin's stock rose, as did the stocks of Boeing, Northrop Grumman, and General Dynamics. This surge in stock prices reflects investor optimism about the potential benefits of government investment in these companies.

Last week, Intel, a leading semiconductor company, announced a historic agreement with the U.S. government. The government will invest 8.9 billion dollars in Intel's common stock to support the company's plans to spend over 100 billion dollars on expanding the flexible semiconductor supply chain. President Trump highlighted the benefits of this deal, stating that the U.S. government acquired these shares without any cost and that they are currently valued at approximately 11 billion dollars. He described the transaction as a win-win for both the U.S. and Intel.

The National Economic Council Director clarified that the government's acquisition of a 10% stake in Intel is not a form of nationalization. He emphasized that this stake does not come with voting rights, meaning the government will not interfere with Intel's operational decisions. This move is seen as the first investment by a sovereign wealth fund, a practice that has precedents internationally. However, it is worth noting that the Trump administration has a history of pressuring companies to change their business strategies, even without holding a stake in them.

The Director also suggested that the government's investment in Intel could be the beginning of a broader strategy to establish a U.S. sovereign wealth fund. He indicated that similar transactions could occur in the semiconductor and other industries in the future. This development underscores the administration's commitment to strengthening the U.S. economy through strategic investments in key sectors.