In recent years, government-directed capital has returned as a critical force in developing, growing, building—and in many cases, reshaping industries and economies. That trend is similar to pivotal historical periods, such as World War II and the 1960s space race. In each of these moments, governments made courageous interventions to help their countries move forward. As the world grapples with modern challenges like technological advancement and energy consumption, this approach has gained renewed attention, particularly in the context of data centers and infrastructure investments.
In the past, the cost of this government-directed capital has too often been forgotten in the urgency of the important cause that it funds. During World War II, for example, the United States issued war bonds to finance military efforts, accepting currency dilution as a necessary measure. The architects who designed these mission-driven, yet historically valuable, projects were called on to think less about profit and more mission. Notably, figures like J. Robert Oppenheimer, Leslie Groves, and Enrico Fermi worked on the Manhattan Project with a singular vision: to develop nuclear capabilities to secure national interests.
Today, the CHIPS Act is a modern-day version of those missions. This program strengthens domestic semiconductor manufacturing. It is a down payment on bigger government-directed investments needed to maintain our technological competitiveness. This act is part of an ongoing, larger story. Now, one can argue that every national government should be subsidizing data centers, going whole hog infrastructurizing and deeply investing in the grid. This urgency comes from the sobering realization that data centers are quickly approaching Cold War scale energy consumption.
These smart grid investments are booming, largely due to robust government investment. It seems that Washington is past merely regulating, and is now actually sponsoring industries on a national scale. As a result, this turn is a sign that the next hyperscaler or major cloud service provider will likely be supported from U.S. Treasury dollars. Traditional venture capital will not be able to sustain this support. This represents a significant shift from past industry funding models.
The implications of this shift are extensive. The companies currently involved in these government-directed investments are sitting on hundreds of billions in cash reserves and are primed for a massive growth. This ambition frequently outpaces discipline, mirroring patterns since the 1940s. The widening spreads for firms involved in these investments have reached multi-year highs, reflecting growing investor caution amid increased government involvement.
The historic examples of government-directed capital also tell a cautionary tale where ambition can easily devolve into hubris. Though the pursuit of these national necessities merits such substantial financial commitments, it poses troubling questions about long-term sustainability and economic equity. The story of what went wrong with the last major attempt to introduce hyperloop technology should be a lesson for today’s federal policymakers and industry boosters.