Brad’s Note: Semiconductors are the biggest drivers of technological advancements in our era. So it makes sense these mission-critical chips are in high demand.
Today, I’m sharing an essay from our colleague Nomi Prins. Nomi follows the biggest trends and government money flows to map out where the best future profit opportunities lie.
Nomi shares how the U.S. government is fully backing the progress of homegrown semiconductors… and she’ll share what she sees happening as a result as well as one way you can set yourself up to profit today.
By Nomi Prins, Editor, Inside Wall Street With Nomi Prins
You should know that while the Federal Reserve mulls monetary policy, money is flowing into a sector that produces real things that you use every day.
I’m talking about semiconductors. Again.
Now, I’ve written about artificial intelligence (AI) hardware, specifically semiconductor chips, recently. That’s because these assets are on the verge of a major positive distortion.
The size of the semiconductor market is expected to nearly triple from about $528 billion in 2021 to nearly $1.4 trillion by 2029.
That growth is necessary to keep up with the AI revolution’s demand for chips. You can read about that in my recent piece, “The Economics of AI Hardware.”
Since I wrote that essay, the amount of fund allocations from the CHIPS Act has skyrocketed.
I’ll get to that in a moment. And I’ll explain what it means for you and your money.
But first, let me give you a refresher about what the CHIPS Act is and why it’s important.
The CHIPS Act
CHIPS stands for Creating Helpful Incentives to Produce Semiconductors. In 2021, President Biden signed the bipartisan CHIPS Act into law.
One of its key objectives is to encourage investment in domestic semiconductor manufacturing capabilities.
That’s why the act provides financial incentives, like grant, loans, and tax credits to companies that invest in semiconductor manufacturing facilities in the United States.
Semiconductor chips are the engines behind items from cell phones to computers to refrigerators to cars to satellites to defense systems.
As demand for these items, and AI technologies to run them, increases, so will the need for semiconductors.
There’s an irony here.
You see, America invented semiconductors. Yet, the United States went from producing 40% to just 10% of the world’s supply of chips.
And though the CHIPS Act passed several years ago, the U.S. government was slow to disperse CHIPS funds to domestic production companies.
On February 19, the White House authorized $1.5 billion for U.S. chip manufacturing firm GlobalFoundries. That money would go to expand its domestic production in New York.
The allocation was part of the $39 billion from the CHIPS Act for domestic semiconductor production.
Since then, there has been a slew of other major fund allocations. The pace of CHIPS funds rolling out the door went into turbo mode.
Let’s break down the key recipients of CHIPS Act grants since then…
Big CHIPS Bucks
On March 20, Intel (INTC) announced a preliminary agreement with the government to receive $8.5 billion in direct funding grants and $11 billion in loans from the CHIPS Act.
That funding will help finance Intel’s semiconductor manufacturing and research and development projects in Arizona, New Mexico, Ohio, and Oregon.
CHIPS Act funding and Intel’s projected investment of more than $100 billion in the U.S. over the next five years comprises the largest public-private investments in the U.S. semiconductor space.
Then, on April 8, Taiwan Semiconductor (TSMC) signed a preliminary agreement with the Department of Commerce to receive up to $6.6 billion in funding from the CHIPS Act.
TSMC is the world’s largest semiconductor foundry company. It is completing its first fab, or manufacturing plant, and continuing construction on its second fab in Arizona.
Financing for this third fab would put TSMC’s total expenditure on its Phoenix, Arizona, site at over $65 billion. That’s the largest foreign investment in the semiconductor arena on U.S. soil.
There’s more.
On April 15, the U.S. government awarded Samsung up to $6.4 billion in CHIPS Act grants for two large-scale projects in Texas. The project in Austin is set to collaborate with the Department of Defense.
And then…
Last week, on April 25, the White House announced a preliminary agreement with Idaho-based chipmaker Micron. That will direct $6.1 billion in funds from the CHIPS Act.
That funding will support construction of the first two fabs of Micron’s planned four fab, or “megafab,” projects in Clay, New York.
Those four facilities will encompass 2.4 million square feet of cleanroom space. That’s the size of 40 football fields.
That money will also support the development of a high-volume manufacturing (HVM) fab. That will have about 600,000 square feet of cleanroom space focused on producing leading-edge DRAM (dynamic RAM) chips in Boise, Idaho.
These investments are part of Micron’s projected total private and public investment amount of up to $125 billion across New York and Idaho over the next two decades.
Enhanced Supply Chain Resilience Means Wealth Opportunities
The CHIPS Act focuses on improving domestic supply chains in the semiconductor industry.
That’s because increasing reliance on semiconductors in various industries brings greater dependence on foreign suppliers. That can lead to national security problems and higher costs.
In 2024, government agencies, industry players, and research groups initiated strategies and conversations to advance domestic semiconductor technology and development.
These collaborations aimed to improve energy efficiency, develop advanced packaging techniques, and create advancing quantum computing processes to speed up machine-learning AI platforms.
As the semiconductor industry evolves, the CHIPS Act will continue to play a crucial role in shaping the future of U.S. semiconductor production.
The Act led to increased private investment, enhanced supply chain resilience, and fostered research and development collaborations.
According to the U.S. Commerce Department, the CHIPS Act catalyzed $450 billion worth of private investment in the semiconductor space.
That’s in tandem with the $29 billion in grants and up to $25.1 billion in loans to seven companies across 16 projects in 10 states.
These domestic semiconductor projects will take years. But they do rely on public and private sector financing.
Readers will recall I wrote about the possibility of a CHIPS2 Act. I believe that this recent acceleration of CHIPS funds allocations is another sign that CHIPS2 is looming.
Meanwhile, you can take advantage of the growing trend in semiconductor investment and development through the Artificial Intelligence and Technology ETF (AIQ).
That ETF covers AI software and hardware companies that are growing in scope as the AI evolution intensifies.
Regards,
Nomi Prins
Editor, Inside Wall Street with Nomi Prins