Senate NDAA Would Create $500 Million Pentagon Fund to Buy Equity Stakes in Private Companies

What the Senate Armed Services Committee Drafted

Buried inside the Senate's version of the 2027 National Defense Authorization Act is a provision to establish what would be called the Defense Equity Investment Account, according to Reason's review of the legislation drafted this week by the Senate Armed Services Committee.

The account would allow the Pentagon to invest up to $500 million in private companies involved in critical minerals, materials, chemicals, or batteries. The specific financial instruments permitted include direct equity purchases, convertible interests, warrants, and revenue-sharing arrangements. Essentially, the legislation provides a broad menu of ways for the federal government to become a part-owner of private firms.

The only firm limits: no single investment can exceed $500 million, and the government cannot take more than a 50 percent ownership stake in any one company. Beyond those two guardrails, Reason reports, the legislation contains few other restrictions.

This Is Already Happening Without Congressional Authorization

The NDAA provision would codify something the Trump administration has already been doing under existing executive authority. The administration has taken equity stakes in more than a dozen private businesses, according to Reason. A significant stretch of executive power, it has received relatively little public attention given the pace of other policy activity.

One example that has drawn scrutiny: Vulcan Elements, a company that manufactures magnets from rare earth elements, received a $620 million loan from the Pentagon's Office of Strategic Capital. Donald Trump Jr. is a partner at Vulcan Elements.

No investigation has been announced and no charges have been filed related to any of these investments. But the overlap between administration investment decisions and the financial interests of people close to the president is the core factual concern animating the debate in Congress.

The Amendment That Failed

Sen. Elissa Slotkin (D-Mich.) pushed an amendment during the committee's closed-door markup session last week that would have prohibited the administration from taking equity stakes in companies with ties to the president, his family members, or cabinet members.

The committee, controlled by Republicans, voted it down.

Slotkin told NOTUS that Republican colleagues explained their votes in unusually candid terms. "Over and over we heard in the NDAA markup a number of my Republican colleagues express concern that they didn't want to insult the president, they didn't want to send a negative message to the president, they didn't want to offend the president, or they were scared of his reaction," Slotkin said.

The Strongest Argument for the Program

Defenders of the approach have a real case to make. The U.S. is genuinely dependent on adversarial nations, particularly China, for critical minerals and rare earth elements that are essential to defense manufacturing. Private capital markets have been slow to finance domestic production of these materials because the economics are difficult and the timelines are long. If the government has identified specific companies with viable production plans and no other financing path, targeted equity investment could produce strategic results that procurement contracts alone cannot.

The $500 million cap and the 50-percent ownership ceiling are at least some structural constraints. And the focus on materials directly tied to defense production is narrower than an open-ended industrial policy fund.

The Problem With That Argument

The problem is that the legislation, as written, provides no mechanism to ensure investments are selected on strategic merit rather than political relationship. The conflict-of-interest amendment was the obvious minimum safeguard, and it was rejected. Without it, the account is structurally indistinguishable from a fund that can legally enrich people connected to whoever holds the White House.

Reason's editorial position is that Congress should not be codifying this practice at all, and that the government has less distorting tools available like permitting reform and direct procurement. This reflects a coherent fiscal-conservative critique, but it applies regardless of which party runs the executive branch. A future Democratic president with a $500 million equity investment fund and no conflict-of-interest rules would face exactly the same accountability problem.

Government taking ownership stakes in private companies is, by definition, a departure from market competition. The policy rationale can be legitimate in specific national-security contexts. The absence of transparency and conflict-of-interest rules makes the rationale impossible to evaluate honestly.

What Comes Next

The Senate Armed Services Committee passed its version of the NDAA this week. The full Senate still needs to vote, and the House will produce its own version before the two chambers reconcile differences in conference. Whether the Defense Equity Investment Account survives that process, and whether any conflict-of-interest language gets added before a final bill reaches the president's desk, remains an open question as of June 18, 2026.