Trump Backlash Adds New Risks to the Stocks the Government Owns

 Trump Backlash Adds New Risks to the Stocks the Government Owns

## The "Trump Trade" Was a License to Print Money — Until It Wasn't

Over the past year, a select group of investors have made a fortune by following a simple strategy: buy whatever stock the Trump administration was about to take a stake in. Intel soared over 300%. MP Materials jumped 87%. Trilogy Metals rallied 73%. The government's unprecedented intervention in the private sector transformed these companies into market darlings.

But as the midterm elections approach, a growing chorus of strategists is warning that the political tailwind driving these stocks is about to shift. The threat comes from two directions: a Democratic-led Congress that could unleash a wave of subpoenas and hearings, and a shareholder lawsuit that could unwind the entire government portfolio. Both risks, if realized, could send these stocks back to earth.

## The Government as Shareholder: An Unprecedented Experiment

The Trump administration has pursued an aggressive industrial policy that goes far beyond traditional subsidies. Instead of simply handing out grants, the government has demanded equity stakes in exchange for funding. It's a strategy designed to give taxpayers a direct financial stake in the companies they back.

The numbers are staggering. Intel shares have surged more than 300% since the first reports of a government stake emerged. MP Materials, a rare earth minerals company, is up 87% after the Pentagon invested $400 million. Trilogy Metals, a Canadian exploration firm, gained 73% after the U.S. agreed to take a 10% stake and approved a critical Alaska road project.

However, much of the gains have proved fleeting. Trilogy Metals spiked from $2.09 to over $10 within days of the announcement, only to fall back to $3.62. MP Materials soared 150% in five weeks, but has since declined nearly 27%. Intel peaked in June after Trump announced Apple would work with the company, and has since dropped 37%.

"There is a sort of interventionist approach that is not fully litigated and mediated in the American system yet," said Matt Gertken, who leads geopolitical and political analysis for BCA Research. "So there's going to be ups and downs in that process".

## The Election Risk: A Blue Wave Could Mean Red Ink

The most immediate threat to these stocks is political. Polls suggest the Democratic Party is likely to win a majority in at least one house of Congress. And they have already signaled their intentions.

Senator Elizabeth Warren, who would become chair of the Senate Banking Committee if Democrats take the chamber, has already written to Commerce Secretary Howard Lutnick questioning the Intel investment. If she gains subpoena power, the hearings could be swift and brutal.

"They're going to want to punch at the president as often as possible for as long as possible," said Henrietta Treyz, co-founder of research firm Veda Partners. She expects Democratic-run committees to summon corporate executives and administration officials to Capitol Hill, creating risks for both the companies' brands and their share prices.

"That's one of the most important takeaways for investors right now," Treyz added.

The precedent exists. In 2009, the government's bailout of General Motors sparked fierce Republican criticism and helped give rise to the Tea Party movement. The difference this time is that the government is not rescuing failing companies—it is picking winners.

## The Legal Challenge: A Shareholder Lawsuit That Could Unwind Everything

Beyond the political threat, a shareholder lawsuit against Intel is making its way through the courts. The suit argues that the Chips Act does not give the government the authority to demand an equity position as a condition of receiving a grant.

The plaintiffs are challenging the deal as a breach of fiduciary duties and an overreach of executive power. If they win, it could unravel the entire legal framework for the administration's portfolio. "If you pull that away, the question is then what happens?" said Mark Malek, chief investment officer of Siebert Financial. "That is why we haven't increased our investment at all".

The lawsuit could take years to resolve, but the uncertainty alone is enough to spook investors. If the court rules against the government, other companies that have taken similar deals—including IBM and GlobalFoundries—could find themselves in legal limbo.

## The "Discount" for Political Risk

Wall Street is beginning to price in the risk. Analysts have noted that the stocks are trading with a "political discount"—investors are hesitating to buy into companies that could become political footballs.

"It is really the government investment that really turned it around, and it's certainly what I think is a factor in keeping the stock where it is right now," Malek said. "If you pull that away, the question is then what happens?".

The surge in these stocks was driven by a simple narrative: the government will back them to success. But that narrative is becoming more fragile by the day. The legal, political, and regulatory risks are accumulating, and the momentum that drove these stocks higher may not survive the coming storm.

## Frequently Asked Questions

### 1. Which stocks are part of the government portfolio?

The primary holdings are **Intel** (INTC), **MP Materials** (MP), and **Trilogy Metals** (TMQ). Intel received an equity investment via the Chips Act; MP Materials got a $400 million investment from the Pentagon; and Trilogy Metals saw the U.S. government take a 10% stake.

### 2. How much have these stocks risen since the government took stakes?

Intel shares are up over 300%, MP Materials has risen 87%, and Trilogy Metals has gained 73% since their respective deal announcements.

### 3. What is the main legal risk?

A shareholder lawsuit against Intel is challenging the government's right to demand an equity stake as a condition of a Chips Act grant. If successful, it could call into question the entire government portfolio.

### 4. What would happen if Democrats win the midterms?

A Democratic-controlled Congress could hold hearings, issue subpoenas, and investigate the administration's equity stakes. Senator Elizabeth Warren, who could become Senate Banking Committee chair, has already signaled her intent to scrutinize the deals.

### 5. Are these stocks safe to hold in a diversified portfolio?

These stocks carry heightened political and regulatory risk that is not typical of most public companies. Investors should consider these risks carefully before investing.

## The Bottom Line

The Trump administration's equity investments created a new class of government-backed stocks—and a new set of risks. The political tailwind that lifted them may soon become a headwind, as midterm elections and legal challenges threaten to reverse the gains.

The stocks are not going to zero, but the risk profile is changing rapidly. Investors who rode the wave may want to consider whether they have the stomach for the turbulence ahead. As Matt Gertken put it: "There's going to be ups and downs in that process".

The ups may already be behind them.

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*Disclaimer: This article is for informational and educational purposes only and does not constitute financial, investment, tax, or legal advice. Stock prices, market conditions, and political outcomes are subject to change. Past performance is not indicative of future results. Before making any investment decisions, please consult with qualified professionals who can evaluate your specific situation.*