America's Strategic Capital Imperative
An argument for long-term government financing for critical technologies.
I’m Ylli Bajraktari, CEO of the Special Competitive Studies Project. In this week’s edition of our newsletter, SCSP’s Brady Helwig, Associate Director for Economy, and Nyah Stewart, Associate Director for Future Technology Platforms, discuss the prospects of a U.S. sovereign wealth fund.
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America's Strategic Capital Imperative
Last month, Executive Order 14196 signaled a long-overdue shift in how the United States approaches national investment. It directed the Commerce and Treasury Departments to develop plans for a sovereign wealth fund (SWF) to invest in "great national endeavors." The directive recognizes a hard truth: to prevail in the 21st-century geopolitical contest, the United States must deploy large pools of strategic capital—deliberately, patiently, and at scale.
China has grasped this for decades. Its government guidance funds—state-backed investment vehicles—have directed hundreds of billions into capital-intensive sectors such as advanced manufacturing, semiconductors, and electric vehicles. Now, Beijing is reportedly preparing a $138 billion national venture fund to scale technologies like quantum computing and AI hardware. The results are visible: Huawei, BYD, and other firms have outpaced Western competitors in 5G and EV batteries, closing key industrial gaps.
In contrast, America's vaunted capital markets increasingly chase software, not the high-barrier, hardware-driven innovations that underpin national power. Roughly 90% of U.S. venture capital today flows into software—an investment pattern optimized for quick returns, not strategic depth. Fusion energy, robotics, and next-gen microelectronics—the foundation of tomorrow's economy and security— often struggle to raise capital.
This is the American innovation system's "Valley of Death"—the perilous gap between research breakthroughs and scalable technologies. One-off government injections, such as the CHIPS and Science Act, have helped, but they are fragmented and episodic. Programs like the DoD's Office of Strategic Capital are promising but underpowered. Annual appropriations, siloed and politically volatile, cannot meet the magnitude or urgency of the moment.
What's needed is a standing mechanism—an American SWF—that aligns capital deployment with strategic national goals. SCSP has long called for such a fund: an institutional vehicle capable of closing market failures in sectors where risk, scale, and time dissuade private investment. Unlike state-level funds that largely focus on local services like public education, a national SWF would target the high-leverage investments vital to national competitiveness: deep tech, manufacturing resiliency, supply chain security, and the alleviation of critical production chokepoints.
A Strategic Mission, Not a Redundant One
The mission must be precise: close funding gaps in key sectors, not replicate existing efforts or crowd out private capital. It must take risks the market will not. This is not about subsidizing stagnation—it's about catalyzing technologies with transformative potential. First-loss capital and loan guarantees are proven tools to de-risk sectors for private co-investment.
Success should be measured not just in return on investment but in strategic effect. Failures will occur. That is the price of bold innovation, not a reason to retreat.
Evergreen, Independent, Aligned
Structure will determine success. An SWF must be institutionally independent—staffed by professionals, insulated from political cycles, and guided by a clear mandate linked to national strategy. The model could resemble IQT (formerly In-Q-Tel): mission-driven, nonprofit, but agile. Governance examples already exist—from the Alaska Permanent Fund Corporation to Norway's sovereign fund, which now manages over $1.8 trillion in assets.
It must also be evergreen—recycling returns into future investments—and passive, avoiding control rights that distort private-sector dynamics. Its role is to fill financing gaps, not dictate business decisions. Over time, such a fund could become self-sustaining, compounding strategic outcomes without heavy reliance on taxpayer dollars.
A Pragmatic Path Forward
Public resources are finite. Geopolitics won’t wait. America's ability to mobilize private capital at a strategic scale is its greatest untapped advantage. An American sovereign wealth fund, with the right leadership, structure, and institutional will, would transform that latent advantage into a durable source of national power.
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SWF needs to be created by Congress. The Exec Order is a good start, but it is open to unending and unpredictable political chicanery.