In January 2025, shortly after being inaugurated, U.S. President Donald Trump signed an order calling for the creation of a U.S.-owned sovereign wealth fund. An SWF, Trump said, would “promote the long-term financial health and international leadership of the United States” through direct investment in “great national endeavors,” such as manufacturing and medical research. Although unmentioned by the administration, an SWF could also help maintain the United States’ technological superiority over China.
Trump’s SWF order has been overlooked amid the flurry of other executive actions, but it nonetheless presents an unprecedented opportunity for American technological innovation. Advanced technology remains the foundation of U.S. economic and national strength. Although innovation driven by private investment has allowed the country to lead in areas such as chip design and drug discovery, next-generation technology sometimes demands greater risk and patience than private capital is willing to bear. As a result, U.S. innovation often proceeds too slowly for a country seeking to lead the next technological revolution.
The right kind of American SWF could efficiently address this problem. It would identify the most important nascent technologies that struggle to attract capital, and back the best startups innovating in those industries. By signaling the national security importance of those technologies, an SWF would catalyze additional private investment toward areas of critical innovation and the supply chains that secure them.
But making an American SWF work would require care. Washington would have to insulate the fund’s managers from U.S. domestic politics, so that investment decisions are made without regard to who wins the White House or controls Congress. And although responsible stewardship of taxpayer funds would require managers to make sound financial decisions, investments must balance prospective returns with the clear strategic purpose of U.S. innovation leadership. This approach would make an American SWF unlike the investments controlled by Beijing, which has spent decades directing massive state and private resources to finance the Communist Party’s five-year development plans. Instead, Washington would use its SWF to identify priorities in commercial technology and nudge U.S. startups toward those goals—combining the interests of the nation with the dynamism and innovation of private investors.
SPREAD THE WEALTH
Washington may not have a sovereign wealth fund, but almost half the U.S. states do. Indeed, the earliest precursor of a national sovereign wealth fund was established in the United States: in 1803, Ohio created a land trust to finance public education in the state. Alabama and Mississippi followed suit after winning statehood a decade later, and Texas set up a cash-financed permanent school fund in 1854. Other states have since set up funds of their own, sometimes financed by oil revenue, for a variety of purposes.
National governments began creating funds, as well. In 1953, Kuwait directed the Bank of England to manage the sheikhdom’s oil profit, which it uses today for government spending and as a savings reserve. Abu Dhabi, Norway, and Qatar established their own public investment funds to hedge against the depletion of their oil supplies. Today, more than 90 countries have established over 160 SWFs. The amount of assets in all these funds combined exceeds $11 trillion. Although 14 countries, many with vast wealth from oil reserves, manage roughly 95 percent of the total assets invested in SWFs, many different countries have created them. In 2024, the United Kingdom created a national wealth fund capitalized at about $35 billion to advance the country’s industrial strategy.
If early SWFs were financed by commodity wealth, almost half the capital of SWFs today comes from other sources, including foreign exchange reserves, issued securities, and budget surpluses. Likewise, SWF investing initially focused on raising revenue, but many funds now aim to spark domestic economic growth by fostering foreign investment or promoting specific industries. Some promote broader policy goals, such as environmental sustainability or medical research.
The U.S. government is already familiar with policy-driven investment programs. In 2019, for example, Congress created the Development Finance Corporation (DFC) from existing U.S. loan entities to help U.S. corporations contribute to international development, including through digital infrastructure and renewable energy projects. DFC was also given the authority to make direct equity investments in companies, although it remains a small portion of its total activity. In 2023, for example, $565 million of DFC’s $9 billion budget went to equity investment. In 2024, the Department of Defense’s Office of Strategic Capital (OSC) launched a program in partnership with the Small Business Administration to provide loans to private investors willing to fund companies in designated technology areas such as advanced materials and quantum science. Unlike many other Pentagon organizations, this office is not designed to create systems ready for military purchase. Rather, it is aimed at promoting long-term private-sector investment in the United States’ industrial base and technological competitiveness.
The U.S. government is already familiar with policy-driven investment programs.
The CHIPS and Science Act, passed in 2022, established a little-known domestic equity investing option, authorizing $500 million for direct investment in U.S. microelectronics innovation. This allocation is dwarfed by the tens of billions in tax credits and loans that the CHIPS Act provides corporations to build chip-fabrication facilities in the United States. Although the equity investing option has not yet been put to use, its structure offers the benefit of potential returns on investment that government grants and loans cannot.
Our organization, IQT, offers yet another model of equity investing on behalf of the U.S. government. IQT is an independent non-profit organization—but one funded by and for the government—that invests in early commercial technologies for use by U.S. national security agencies. Because of intensifying competition with China, we added a new line of investment to promote U.S. innovation supremacy in next-generation computing, energy security, and engineering biology. Our teams identify the most important but lagging component technologies in these areas, find promising startups to support and encourage private investors to invest alongside IQT. This pilot effort is on track to complete a dozen investments with less than $20 million.
In theory, an SWF can operate at a scale and with an influence that current options cannot. It makes sense to build on existing models and programs where possible. For example, IQT’s equity investing pilot could be scaled in size and breadth and spun out independently as part of an SWF. An early-stage equity investment effort could feed into programs to support a separate fund for later-stage companies. OSC’s loan program might provide a useful framework. And DFC’s mandate for overseas investment could be broadened to include domestic activity and given greater independence. However an innovation fund is combined and structured, it should strive to leverage U.S. private capital to greater effect at the cutting edge of these technologies, at a low cost to taxpayers.
FINANCIAL INDEPENDENCE
Establishing an SWF would have risks. An early-stage fund would undoubtedly invest in some companies that flounder. But fund managers can mitigate that possibility by being diligent about SWF investments, evaluating the management team and the fundamentals of prospective companies in addition to their technology goals. Washington can also complement new investments with policies that mitigate risk. Congress, for example, has proposed legislation to protect U.S. companies from Chinese dumping. In doing so, it is attempting to help companies (and the country) avoid the fate of Solyndra, a solar cell company that received $535 million in federal loans before going bankrupt, becoming the poster child for wasteful government spending. Yet the company failed in part because the United States had no plan to address the fallout when China flooded the market with cheap, subsidized solar cells. The Trump administration should anticipate Chinese dumping aimed at undermining U.S. competitors in critical minerals and other supply chains and safeguard its investments with plans to stabilize pricing and purchase innovative American technology.
An American SWF also risks becoming politicized or otherwise corrupted, as a handful of foreign SWFs have. In China, for example, state investment ties businesses to the political interests of the Chinese Communist Party (and, sometimes, to the personal interests of CCP leaders). To prevent a U.S. fund from being similarly misused, Washington should select and charter the investing entity but allow it to operate independently as a nonprofit to avoid it being hijacked by personal interests or political conflicts. The fund’s investments, the rationale behind them, and the fund’s overall performance should be transparent and publicly available. The government should conduct oversight of the fund by annually evaluating its returns, but it should have no role in its operation.
Ultimately, the risks of an SWF are worth the potential value to the nation. In the United States today, commercial technology is driven almost exclusively by the market. That means there is plenty of money for artificial intelligence and cybersecurity. But many of the technologies essential for maintaining the United States’ global primacy, such as biomanufacturing or new materials for the next generation of computing, fall by the wayside. This impedes innovation and handicaps the United States in its competition with China, which employs an enormous SWF and directs and nurtures national champion companies that dominate global markets. The United States should never seek to match China’s brute force approach to economic power. But it can establish its own fund to help forge a path to sustained technology preeminence. With relatively small amounts of money, Washington can help steer private capital toward promising companies that investors might otherwise ignore. A separate fund could support scaling up the most successful of these startups into global forces.
An SWF would also play to U.S. national strengths: the United States is always best served when government and private industry are aligned in support of the national interest, as they often were during the Cold War. But the country has yet to fully harness the energy and independence of the private sector to further a long-term vision of economic prosperity and national security. A sovereign wealth fund could. Trump’s executive order, then, could mark the beginning of a new vision for American technology leadership in the twenty-first century.
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