The attitude in Silicon Valley toward government used to be tax but don’t regulate us. That looks to be changing in the AI era. OpenAI now wants more regulation, more taxation and even partial government ownership. Is this the devil’s political testing of CEO Sam Altman?
Open AI CEO Sam Altman
OpenAI recently filed for an initial public offering with the Securities and Exchange Commission, which is a chance for early investors and employees to realize capital gains. But the company reportedly also wants to reserve 5% of its shares for the “public”—not as private owners but to the government, perhaps to a sovereign wealth fund.
Beijing takes stakes in major tech companies known as “golden shares” that give the Chinese Communist Party special voting power and veto rights over corporate decisions. OpenAI investors may not want more political control, but that will inevitably be part of its Faustian bargain with government. Why would Mr. Altman want to make his company a vassal of the state?
One reason may be to buy political advantage against competitors. OpenAI faces competition from the likes of Anthropic, Google, Meta and xAI. Unlike its top rivals, OpenAI doesn’t have a large pool of cash or profits on its balance sheet to finance its data center build-out.
OpenAI plans to spend $600 billion on AI infrastructure by 2030, yet it is generating about $2 billion in revenue a month. An IPO would raise cash, but nowhere near enough to finance its ambitions. Perhaps Mr. Altman hopes that giving the government a stake will lower his company’s cost of borrowing.
Government ownership might also yield regulatory favors—such as faster approvals for models, permits for data centers or federal contracts. A government stake could provide an implicit backstop, making OpenAI too big to fail. The government won’t want to take a loss on its stake, even if it means keeping it alive like a zombie firm.
OpenAI in its early years supported a more hands-off approach to AI regulation, but the company has been warming to more federal involvement. It recently backed a requirement that government review new “frontier” AI models before developers deploy them. Regulation typically hurts upstarts, so OpenAI may be hoping to build a regulatory moat.
This spring it released a 13-page white paper, “Industrial policy for the Intelligence Age,” which calls for expanding government control of AI and the private economy. It supports higher taxes on capital gains, corporate income and “automated labor.” It also suggests that government “incentivize” a 32-hour workweek with no loss in pay.
Some of these bad ideas may come from its Democratic hires and advisers, including Aaron Chatterji (Biden economist), Laphonza Butler (former California Senator and union organizer), Anna Makanju, (Obama and Biden alumna), and Ann O’Leary (California Gov. Gavin Newsom’s former chief of staff).
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The problem is that any government ownership comes with high business costs. company decisions are subject to political intervention if they become at all controversial. The French government has used its stake in automaker Renault to prevent plant closures. The Trump team conditioned approval of Nippon Steel’s acquisition of U.S. Steel on the government receiving a veto over corporate decisions, which it has exercised to block an Illinois plant from closing.
AI firms won’t be exempt from this political interference, no matter the promises Mr. Altman gets from the Trump White House, JD Vance or Mr. Newsom. Politicians are fickle, and they follow the demands of the polls and interest groups.
The larger harm will be to the U.S. economy if its most dynamic new industry becomes an adjunct of the government. The U.S. has long prospered because it has avoided the snares of state capitalism. It’s how the U.S. defeated the keiretsu model of Japanese business and the state ownership in so much of Europe. China’s state-owned industries are the weakest part of its economy.
Mr. Trump’s plunge into buying socialist stakes in U.S. companies may become one of his worst legacies. “It almost becomes a partnership with the American public,” he said recently. “The American people can benefit from the success of AI, and by that, they’re going to like it better.” He means a partnership with American politicians, not the public. Wait until President Newsom or JB Pritzker grabs hold of that precedent.
Americans will benefit from AI through pharmaceutical breakthroughs, productivity gains that raise wages, and myriad other ways that are hard to predict. They benefited from the internet without the government taking a stake in Google or, thank heavens, AOL. OpenAI can succeed or fail on its own.
