It is clear that the government and wall street are generally of one mind on this. One recent specific way the government contributed to this is via the Tax Cuts and Jobs Act (TCJA) of 2017, which increased tax burden of R&D. They've also cut a lot of their own research funding (NIH, NSF).

I can't make the argument that the government is "hands off, small government" because I simply don't see the evidence of that. To the contrary, I have seen things like TARP, stimulus checks, oh, and the government buying 10% of Intel.

The strategy is fine, the problem is there aren’t enough domestic competing players in cutting edge semi nodes for it to work anymore. The US had many competing foundries before its semi industry was hollowed out by Japan and Korea. Now the only player in the US is Intel and, having been mismanaged for the last decade or more, it’s at risk.

I don’t think propping up Intel is going to work though, they’re a sinking ship and their management seems too risk averse and incompetent. It might be better for the US, long term, to let them collapse and sell off strategic parts to different domestic players (NVIDIA, AMD, micron, TI, etc) and use tariffs or other trade policy to force some amount of leading edge semi fabrication to use domestic manufacturing.

I would argue that federal and state governments play even shorter games than investors in the stock market. They're constantly putting their thumbs on whichever scales are politically expedient to claim they did something every 2/4/6 years when it's time for reelection.

Just as an example, the calculus for "where should I build a factory" comes down to "which politicians give the biggest tax incentives" and not any market dynamics.