Trump's pump and dump scheme analysed

When $10 million equals $10 billion

In an era where government policy meets speculative mania, a new playbook has emerged for pumping billions in paper wealth from millions in actual capital.

For me, the math stopped making sense yesterday (Oct 22), when the Trump administration floated investing roughly $10 million each in quantum computing companies—and the market responded by sustaining multi-billion dollar valuations for firms with almost no revenue. IonQ, trading at a $20 billion market cap, would receive federal backing equal to 0.05% of its market value. The government’s potential stake would be smaller than a rounding error, yet these stocks had already surged 400% to 6,700% over the prior year on speculation about government support.

This is the new alchemy under Trump 2.0, and it looks suspiciously like the pump-and-dump schemes the president and his family perfected with cryptocurrency. In January 2025, Trump launched the $TRUMP memecoin, which soared to a $15 billion market cap before crashing 80%, with Trump’s family retaining an 80% stake worth potentially $50 billion on paper. His sons Eric and Donald Jr. have promoted their own crypto ventures, while Melania’s $MELANIA coin followed the same pattern. The crypto schemes netted the Trump Organization at least $350 million according to Financial Times analysis, functioning as what finance experts called “Idi Amin level corruption” and a “classic pump and dump.” Now the same playbook is being applied to publicly traded companies—except instead of Trump keeping 80% of the tokens, taxpayers fund the initial pump while private investors reap hundredfold gains.

The multiplication mechanism works through psychology more than capital. Intel provided the template: the administration converted $8.9 billion in CHIPS Act funds into a 9.9% equity stake in August 2025, purchasing shares at $20.47 when market price was $24.80. Intel’s market cap then expanded from $108 billion to $181 billion—a gain of $73 billion, or 8.2 times the government’s investment. The signal mattered more than the sum. When Washington validates a company as strategically critical, it removes tail risk, implies future contracts, and attracts institutional capital that was waiting for permission to pile in. Nvidia and SoftBank followed with their own multi-billion dollar investments. The government’s $8.9 billion catalyzed over $20 billion in total capital.

But quantum computing exposes the scheme’s speculative core. These companies trade at valuations divorced from any economic reality. IonQ projects $82-100 million in 2025 revenue against a $20 billion valuation—a price-to-sales ratio of 340x. Rigetti brought in $1.5 million in Q2 2025 revenue and commands a $13 billion market cap, for a P/S ratio of 1,796x. D-Wave trades at 494x sales, while Quantum Computing Inc. reaches ratios between 2,086x and 10,250x depending on the source. The most frothy dot-com bubble stocks in 1999-2000 peaked at 30-40x sales before cratering. These quantum stocks trade at ten to five hundred times those historical bubble levels, and Google’s December 2024 Willow chip announcement—which demonstrated quantum supremacy but no real-world applications—while initially devastating the stocks, only pumped them higher by validating the technology’s theoretical potential.

The circular investment patterns in AI expose an even more brazen manipulation. Nvidia announced it would invest up to $100 billion in OpenAI in September 2025 to fund data center buildouts. OpenAI will spend that money leasing Nvidia GPUs. Analysts at NewStreet Research calculated that for every $10 billion Nvidia invests in OpenAI, it will see $35 billion in GPU purchases or lease payments—a 3.5x multiplier that equals 27% of Nvidia’s annual revenue. When Nvidia announced the deal, its stock jumped 4%, instantly adding $170 billion in market cap. OpenAI’s valuation hit $500 billion. The money flows in a loop: Nvidia invests → OpenAI buys Nvidia chips → both valuations soar → repeat. Bernstein Research analyst Stacy Rasgon warned the “circular nature of this deal goosing up everyone’s earnings and everyone’s numbers” raises bubble concerns.

CoreWeave exemplifies how the scheme works for smaller players. The AI cloud infrastructure company IPO’d in March 2025 at $40 per share after a difficult roadshow where the market was “jittery.” Nvidia stepped in, anchoring the deal with a $250 million investment at $40. The stock initially struggled, dropping 7.9% the day after IPO. But Nvidia held $900 million worth of shares by end of March, then increased its stake to 24.3 million shares worth $3 billion by Q2. In September, Nvidia signed a $6.3 billion deal guaranteeing it would purchase CoreWeave’s unsold capacity through 2032. CoreWeave stock tripled from IPO levels. The company trades at 19x price-to-sales with no P/E ratio (it’s unprofitable), but Nvidia’s backing provided the “put” that made the speculation seem safe. CoreWeave spends its capital expenditures buying Nvidia chips, then Nvidia invests in CoreWeave, then Nvidia guarantees to buy CoreWeave’s excess capacity. The money circles back, valuations inflate, and no one can determine if there’s real demand underneath.

Where Wall Street once relied on the “Fed put”—the belief that the Federal Reserve would bail out markets during crashes—we now have the “Trump pump.” The administration’s equity stake strategy transforms government signals into speculative rocket fuel. MP Materials received a $400 million Department of Defense equity stake in July 2025, making DOD the largest shareholder at 15%. The stock surged 50% in a single day, adding $2.5 billion in market cap. The government sweetened it with a 10-year price floor guarantee of $110/kg for rare earth materials, plus 100% offtake agreements. Risk to the company: eliminated. Upside for early investors: extraordinary. Year-to-date MP Materials climbed over 400%. Trilogy Metals received a $35.6 million DOD investment in October and skyrocketed 211% in one day—a 6x to 8x same-day multiplier.

Lithium Americas shows how the administration leverages even existing commitments for equity extraction. The Canadian company received a $2.26 billion Department of Energy loan under Biden for its Nevada Thacker Pass mine. When Lithium Americas asked for “a small change to the loan repayment period,” the Trump administration countered by demanding up to 10% equity. A White House official told Reuters: “President Trump supports this project. He wants it to succeed and also be fair to taxpayers. But there’s no such thing as free money.” The stock surged 90% on news of potential government stake. The pattern repeats: companies approach government for support, Trump administration converts grants and loans into equity positions, stock prices multiply, early investors profit massively while government owns a sliver. Meanwhile, some mining companies are rushing to close loans before the administration can renegotiate terms or pause disbursements entirely—knowing that Trump’s unpredictability makes any deal subject to revision if it doesn’t generate favorable optics or political value.

Oracle participated in Project Stargate, the $500 billion AI infrastructure joint venture announced with Trump at a White House ceremony in January 2025. The stock jumped 13% the next day and climbed 34% year-to-date. While technically a private consortium with OpenAI and SoftBank, the presidential branding and White House venue signaled who would benefit from government AI procurement. Defense contractors await their turn—Commerce Secretary Howard Lutnick confirmed the Pentagon is weighing equity stakes in companies like Lockheed Martin, with Palantir seen as the likely next target after its stock rose 200% since Trump’s November 2024 election. The administration even floated taking a stake in Critical Metals’ Greenland rare earth project, which would give Washington 8% ownership—part of Trump’s broader interest in “owning” Greenland’s resources.

The multiplication mechanism depends on a specific sequence.

1. First, companies lobby the administration for investment, loans, or policy support.

2. Second, Trump officials hint at or announce government backing, often at White House ceremonies for maximum visibility.

3. Third, stock prices spike as retail investors experience FOMO and momentum traders pile in.

4. Fourth, institutional capital follows, interpreting government involvement as validation.

5. Fifth, analysts raise price targets, citing “government support” as a fundamental catalyst.

6. Sixth, the feedback loop becomes self-reinforcing—rising prices attract more buyers, financial media amplifies the narrative, options leverage multiplies gains.

The actual government dollars deployed matter far less than the signal those dollars send.

For Intel, this multiplication arguably reflects improved fundamentals—reduced bankruptcy risk and validation of its strategic importance for American semiconductor independence. But when Quantum Computing Inc. trades at 10,250x sales, or CoreWeave commands $58 billion with quarterly losses of $290 million while admitting its chip inventory faces obsolescence as newer generations arrive, we’ve crossed from rational repricing into pump-and-dump territory. The only difference from the $TRUMP memecoin is that these companies have actual businesses—just ones whose valuations bear no relationship to current or foreseeable cash flows.

Research on signaling effects shows government commitments can rationally justify market cap gains exceeding initial investment when they credibly reduce uncertainty and validate long-term strategic importance. IMF studies find that public investment multipliers are significantly higher when the initial capital stock is low. A Federal Reserve analysis confirms that policy announcements contain information effects that exceed direct financial impact. The mechanism can work when governments make genuine, sustained commitments to strategically vital industries. But when a company with under $1 million quarterly revenue commands a multi-billion valuation based primarily on talk about potential future investment, that’s not a rational repricing—that’s speculation fueled by the greater fool theory, where profits depend entirely on finding someone willing to pay more tomorrow.

Historical precedents offer many warnings. For example during the 1997 Asian financial crisis, massive capital inflows drove Thai, Malaysian, and Indonesian stocks up 300-500% on perceptions of stability and government support. The boom masked the many fragilities in their financial systems and crony capitalism. When the confidence evaporated, the collapse was catastrophic.

In 2020, when Trump 1 announced a $765 million government loan to Kodak for pharmaceutical manufacturing, the stock surged from $2 to $60—a 3,000% gain. The SEC investigated insider trading, convicted two individuals who made $1.5 million using non-public information about the announcement. The loan was put on hold, the deal collapsed, and the stock crashed.

China’s 2015 government stock purchases stabilized markets short-term but research found the intervention distorted price discovery and created long-term market dysfunction.

The dot-com parallels are unavoidable. In 1999-2000, extreme valuations disconnected from fundamentals were justified by “new paradigm” thinking. Government spending on internet infrastructure lent credibility to the narrative that everything had changed. But when reality intruded—you know those pesky things called profits?—the collapse wiped out trillions. Quantum computing may indeed be transformational. The science is definitely real. But real technology doesn’t guarantee rational stock prices. The internet revolutionized civilization, yet most 1999 internet stocks went to zero.

Trump’s approach differs fundamentally from past industrial policy. Obama’s TARP and auto bailouts were emergency crisis interventions, eventually sold at a profit. Biden’s CHIPS Act and Inflation Reduction Act deployed grants, tax credits, and loans—subsidies without equity stakes. Trump 2.0 takes ownership positions in publicly traded companies during non-crisis conditions, with the president personally appearing at ceremonies to brand corporate investments as administration achievements. The model combines sovereign wealth fund investing, industrial policy, and personal branding in unprecedented ways—while the president simultaneously promotes his own cryptocurrency ventures that operate identically to the pump-and-dump schemes he’s now orchestrating at government scale.

The timing of announcements raises manipulation concerns. On April 9, 2025, Trump posted “BE COOL!” and “THIS IS A GREAT TIME TO BUY!!!” on Truth Social in the morning. That afternoon, he announced a 90-day pause on tariffs that had crashed markets the prior week. The S&P 500 posted its biggest single-day gain since 2008, surging 9.52%. Democrats accused Trump of market manipulation—posting buy recommendations hours before policy changes that would drive markets higher. Senator Markwayne Mullin sold $290,000-$700,000 in stocks on April 8. Representative Kevin Hern sold $500,000-$1 million on March 31, before Trump’s April 2 “Liberation Day” tariff announcement. CNN analysis found spikes in lawmaker trading around Trump administration announcements, suggesting information asymmetry that benefits insiders.

The circular nature of AI investments particularly resembles the vendor financing that characterized past bubbles. Cisco in the 1990s lent money to telecom equipment companies to fund buildouts that created demand for Cisco products. The cycle worked until the overbuild became obvious and the bubble popped—Cisco’s stock has never recovered to its 2000 peak. Nvidia’s $100 billion OpenAI investment, where OpenAI spends the money right back on Nvidia chips, mirrors that pattern at vastly larger scale. When Morgan Stanley analyst Brian Nowak analyzed the web of circular deals—Nvidia invests in OpenAI, which buys services from CoreWeave, which Nvidia also owns 7% of, which then buys more Nvidia chips—he noted the difficulty of “disentangling what money is flowing where.” Analyst Jamie Zakalik at Neuberger Berman warned investors are concerned about “the circular nature of this deal goosing up everyone’s earnings and everyone’s numbers.”

Trump’s claimed investment totals reveal another aspect underlying the narrative: creative accounting. The president has touted “$17 to $18 trillion” in investments attracted, which the White House officially counts as $8.8 trillion. But CNN’s item-by-item analysis found significant exaggerations: UAE commitments described as $1.4 trillion over 10 years with vague terms; EU “expected” rather than committed investments; Apple’s $600 billion and Nvidia’s $500 billion announcements including existing spending plans that would have occurred regardless. The actual government equity investments total less than $10 billion, yet associated market cap gains attributed to these announcements run into hundreds of billions. Companies announce U.S. investments to avoid tariffs or curry favor, and the White House adds them to the tally as “wins.”

Critics warn the administration has positioned itself simultaneously as investor, regulator, customer, and dealmaker—creating profound conflicts. For Intel, Commerce holds equity while administering CHIPS Act funds and setting semiconductor policy. For MP Materials, DOD is largest shareholder, primary customer via offtake agreements, the lender, and the entity setting critical mineral policy. Commerce Secretary Lutnick described some defense contractors as “basically an arm of the U.S. government already,” blurring lines between private enterprise and state control. When government owns equity, threatens tariffs to force “investments,” and takes credit when companies comply, the distinction between partnership and coercion disappears.

The multiplication mechanism works both ways too. Governmental signals do inflate these valuations far beyond reasonable investment amounts, but when the policy shifts, it can deflate them just as quickly. Quantum stocks first fell 7-17% on October 22 when Google introduced its new quantum chip. Ostensibly positive news for quantum stocks. But these stocks had already run up so far on speculation that this actual news became a “sell the news” moment. Momentum that drives prices up reverses just as forcefully. Behavioral finance research shows overconfidence, anchoring to recent prices, and representativeness bias that fuel momentum booms also amplify crashes. When herding behavior reverses, there’s a stampede for exits.

The government investment multiplier can serve legitimate economic purposes when deployed strategically—public investment can crowd in private capital, accelerate innovation, and generate returns exceeding initial outlay. But Trump’s approach looks less like strategic industrial policy and more like exploitation of market psychology for short-term optics and personal enrichment. Intel’s case shows the multiplier can work rationally with genuine strategic considerations and reasonable deal terms. The quantum and AI circular investment cases suggest something darker—extreme valuations with no fundamental support, bubble characteristics throughout, and government involvement providing narrative hooks that attract speculative capital into increasingly fragile structures.

For taxpayers, the outcome remains uncertain. If Intel appreciates and the CHIPS Act revitalizes American semiconductors, the policy succeeds. If quantum breakthroughs materialize and early government backing establishes American leadership, these investments may justify the costs. But if quantum stocks collapse under their valuations’ weight, if circular AI investments unwind when the music stops, or if government equity stakes distort corporate decision-making and create moral hazard, the policy will look like speculative gambling with public funds. The multiplier mechanism that turns millions into billions on the way up works just as efficiently in reverse. When signals change from bullish to bearish, when momentum reverses, or when fundamentals eventually matter, market cap destruction could be as spectacular as creation. The government owns a piece of that downside, taxpayers own the consequences, and Trump has already demonstrated with $TRUMP memecoin that he has no qualms about leaving retail investors holding the bag after insiders cash out. The difference this time is the scheme runs at the scale of entire industries, backed by federal appropriations and presidential ceremonies, turning the United States government into the world’s largest pump-and-dump operation.

---

Disclosure: I am shorting CRWV via long term PUT options. And I’ am looking into shorting some of the names mentioned in this article.
Not financial advice, do your own due dilligence.