Wall Street’s New Obsession: Reading Washington

Wall Street isn't just betting on company performance anymore. It's betting on Washington.

As investors hunt for the Trump administration's next winner, they're increasingly trying to anticipate which industries and companies will benefit from White House policy — from tariffs and export controls to procurement, subsidies and even presidential attention itself.

That has changed how investors think about risk. Beyond earnings and cash flow, they're weighing which CEOs have the White House's ear, whether a presidential announcement could transform a company's prospects overnight, or whether a public falling-out could wipe out billions in market value.

"I've been doing this for 20 years, I've never seen it like this," said Henrietta Treyz, co-founder and director of economic policy at Veda Partners, an investment advisory firm.

Treyz said clients now regularly ask whether industries ranging from copper to polysilicon are about to land on the administration's radar, viewing government attention as a potential advantage but also a new source of risk.

Most recently, the White House has floated the idea of taking stakes in top AI companies, raising questions among Silicon Valley leaders and investors.

But that kind of intervention could distort the market, said Luigi Zingales, finance professor at the University of Chicago Booth School of Business. Markets work best, he said, when investors are rewarded for identifying the next breakthrough — not the next company to win political backing.

“We’re no longer trying to figure out what is the next good allocation of capital, we’re trying to figure out what is the allocation of capital most favored by President Trump,” said Zingales. “It’s a terrible sign of not only the market, but the economy.”

Intel has become Wall Street’s clearest example of that phenomenon.

When CEO Lip-Bu Tan made a last-minute trip to the White House last August, investors knew the meeting mattered. Just days earlier, President Donald Trump had publicly called for Tan to resign, alleging his ties to China made him unfit to lead one of America's most important chipmakers. Yet Tan emerged from the meeting with the federal government set to own roughly 10 percent of Intel through a restructuring of its CHIPS Act support — a remarkable outcome for a publicly traded company. Since then, Intel's shares have soared nearly 500 percent, although much of that gain could be due to the broader semiconductor boom.

"We shouldn't over-index on the government investment in explaining why Intel's stock is doing so well," said Chris Miller, a Tufts Fletcher School professor and author of “Chip War.”

In June, Intel shares surged again after Trump announced that Apple would partner with the company to make chips in the U.S., saying his administration helped broker the deal. Neither Apple nor Intel has publicly confirmed the agreement, but the announcement further reinforced investors' perception that Intel sits at the center of the administration's industrial strategy.

For investors, the bigger question is whether Intel can sell more chips. Government signaling alone is rarely enough to sustain a rally unless it's accompanied by policies that boost revenue, lower costs or improve a company's outlook.

IBM could become the next test case. Its shares jumped roughly 42 percent in the days following the administration announced plans in May to back a new quantum chip foundry. Even after surrendering part of that rally, the stock remains more than 30 percent above its pre-announcement level.

The calculus is different in critical minerals, where the administration's backing has come with policies that directly improve companies' bottom lines rather than simply signaling confidence. Purchase guarantees, price floors and other forms of support aimed at reducing dependence on China have given investors reasons to expect higher revenue and lower risk, making government involvement a much stronger investment signal than an equity stake alone.

The administration's deal last July with MP Materials crystallized that distinction for investors, combining an equity stake with long-term purchase commitments and price guarantees that directly strengthened the company's economics.

“Not all the government equity stakes are created equally,” said Tobin Marcus, head of U.S. policy and politics at Wolfe Research. “Coming out of the MP Materials deal, there was a very active search for what subsequent investment might look like in that space.”

But there are areas, such as artificial intelligence, where government intervention could give investors pause.

AI technology is advancing rapidly, regulation remains in flux, and although the White House lifted export restrictions on Anthropic last week, the industry remains exposed to abrupt political intervention. Making the government a shareholder would inject an entirely new source of political risk into an industry already defined by uncertainty.

Unlike critical minerals, where government support comes with purchase guarantees and other tangible economic benefits, AI companies already enjoy strong investor demand and rapid growth. Several investors and policy experts said an equity stake alone would likely not help those companies' fundamentals.

"If you look at Intel or the critical minerals sector, you have a national security need and a market failure where private investors don't see the financial benefit, so it makes sense for the government to intervene," said Dan McCarthy, a senior adviser at Veda Partners. "Those dynamics don't exist with AI; these companies are already very successful."

A government stake could also introduce regulatory uncertainty, investors said, because the same government investing in AI companies would also be writing the rules governing them.

“There's intense debate about regulation right now, so I think government stakes in AI companies, if they materialize, are likely to be seen as a signal of political favor,” said Miller.

For investors trying to read Washington, the question is no longer just where the government intervenes — but whether political favor has become a market signal in its own right.