THE TRUMP administration has deployed industrial-investment policies from loans to equity stakes across a range of industries. Most of these have focused on established sectors like lithium mines and rare-earth processing. But last month the Commerce Department announced investments to shape an industry that barely exists today: quantum computing. President Donald Trump followed this up on June 22nd with two executive orders mandating “a cohesive, whole-of-government approach to accelerate deployment and commercialisation” of the sector.
America’s government is investing $2bn in nine quantum-computing companies and will receive equity stakes in return. (Unsplash)
America’s government is investing $2bn in nine quantum-computing companies and will receive equity stakes in return. Quantum computers make use of quantum physics to carry out highly complex calculations at speeds well beyond even the most advanced traditional computers. Though these computers are not well suited to all fields, they matter a great deal for certain tricky problems like molecular modelling and algorithmic encryption. When scaled up, they will supercharge efforts to discover new drugs, invent new materials—and overcome adversaries’ staunchest cyber-defences.
Quantum computing is still young, but progress is quick. DARPA, the Pentagon’s R&D arm, has been assessing private firms’ capabilities via the Quantum Benchmarking Initiative. Its leader recently predicted that at least one company will have a working, large-scale quantum computer by 2033. Dario Gil, who formerly ran IBM’s quantum initiative, expects there will be a scientifically useful quantum computer by 2028.
The world must therefore start planning for this. China is rushing to lock down supply-chain nodes that will enable it to be the first to scale up. In many critical technologies, America faces entrenched supply chains that are concentrated in Asia. China dominates manufacturing of batteries and drones. Taiwan has a big lead in chipmaking.
The American government has an essential role to play in addressing supply-chain concentration, particularly when China uses its position for political leverage. China has repeatedly weaponised supply-chain chokepoints, most notably via a series of restrictions on critical minerals and magnets. Yet the past few years of efforts to recast supply chains show how hard and costly this is. Despite billions of dollars of government investment in chips and rare earths, these industries will take years to diversify.
In turning its attention to quantum computing, the Commerce Department is trying to avoid the mistakes America has made in other sectors. The government has long invested in advanced technology with national-security relevance, via programmes like DARPA. What’s new is that it is doing so at scale, and with the explicit aim of avoiding future supply-chain dependencies.
The Commerce Department also deserves credit for making diversified investments. Experts disagree about which quantum-computing architecture will prove best. So, rather than betting on a single one, the new funds will support numerous. The decision to back nine companies with different approaches will speed up development without undercutting competition.
Finally, these investments recognise the need not only to design, but also to build. In AI, America relies almost exclusively on Taiwan’s TSMC to produce the advanced chips that nearly all tech companies require. It must avoid similar dependencies as quantum computing emerges. For this reason, the Trump administration’s investments include nearly $1.4bn for the development of American quantum-chip foundries.
So far, so good. But the reality is that the Trump administration’s investments in emerging tech sectors, viewed together, lack coherence. It may be doing the right things in quantum, but this stands in contrast to the lack of clarity behind investments in other spheres—not least the conflicting signals given out over possible investments in leading AI firms. This administration, as well as Joe Biden’s before it, has embraced industrial policy but lacks limiting principles. Without them, such efforts risk being scattershot, excessive or driven by politics and personal interest rather than national needs.
One such principle is that major interventions should be justified by a clear national-security requirement or severe economic vulnerability that the market won’t solve on its own. Given quantum’s cyber-security implications, this test is easily passed here.
A second principle is that the government generally should not invest where it can simply buy. It doesn’t need to own furniture factories to kit out its offices or oil fields to fuel its fighter jets. But some assets cannot be reliably bought on the open market; there are only so many sources of rare minerals and strategically placed ports to go around. Others are so young—like quantum computing—that buyable products do not yet exist.
The American government is reportedly considering drone companies for its next investments. However, drones are a well-established product, albeit one where American production has lagged behind China’s. Taking stakes in drone-makers requires a justification of why this strategy produces better results than simply committing to buy more American or allied-made drones.
Third, any government should keep investments at arm’s length. Even where risk capital is needed, it is worth asking whether direct equity stakes are the right tool. The Trump administration understandably says that taxpayers should benefit if companies that receive funding do well. But this could also be accomplished with instruments like warrants that avoid thorny entanglements and the perception or reality of political meddling.
The Trump administration deserves credit for forward-looking investments that help protect the quantum industry from the supply-chain risks that have plagued other industries. But as it eyes equity stakes across America’s leading tech sectors, it needs to forge and abide by principles that clarify where government action is critically necessary, and where it isn’t.
Joshua Zoffer was special assistant to the president for economic policy from 2023 to 2024. Chris Miller is the author of “Chip War: The Fight for the World’s Most Critical Technology”.
