Location, location, location.
It’s said that these are the three most important aspects of a property. This is especially true in the development of AI.
AI is an intrinsically “local” technology. With few exceptions, AI applications must operate geographically close to processing power with some combination of cloud and edge computing.
So, proximity matters. Location matters.
And the semiconductor industry is taking the mantra to heart… and relocating back to the United States, where it first started. (In 1958, Jack Kilby invented the integrated circuit in Dallas.)
While U.S. companies dominate chip design, the physical manufacturing has been heavily concentrated in East Asia, where most of the world’s fabrication (fabs) are located.
Taiwan leads the charge in global semiconductor output. South Korea, Japan, and China follow.
But now, a major American comeback is on the table. And it’s due in part to rising geopolitical tensions between China and Taiwan.
So, in today’s Smart Money, let’s take a closer look at the global factors driving the U.S. chip boom. Then, I’ll share the best way to capitalize on the coming “Made in America” trend.
Let’s dive in…
China, Taiwan, and the Chip Crisis
Semiconductors are the “brains” of virtually all modern electronic devices. Almost anything with an on/off switch has at least one semiconductor in it.
A single “lights out” warehouse – which we discussed in Monday’s Smart Money – requires hundreds of thousands of such chips.
Taiwan produces 70% of the world’s chips – not to mention a whopping 90% of the advanced chips used for AI databases, smartphones, and modern automobiles.
Its economy has been called the “most indispensable” in the world.
This is where China poses a major risk.
China and Taiwan have been in a state of political and military tension for roughly 75 years. And these tensions have increased significantly over the past year.
China and Taiwan have been in a state of political and military tension for roughly 75 years. And these tensions have been increasing over the past year.
On Monday, Beijing vowed to defend what it considers sovereignty over Taiwan, warning against external interference (the U.S. in particular). And Chinese President Xi Jinping recently ordered 153 warplanes to fly by Taiwan in one 25-hour period.
Now, Xi might just be flexing China’s muscles, but he’s also said that Chinese control over Taiwan is an “historical inevitability.” Taiwan takes that threat seriously… as do most semiconductor companies. That’s why there’s a huge push to bring semiconductor manufacturing back to the U.S.
In fact, Taiwan Semiconductor Manufacturing Co. (TSM) – the world’s largest contract chip manufacturer – is accelerating plans to build an advanced packaging facility at its Arizona site.
TSMC is currently manufacturing wafers, the base of semiconductors, in Arizona. However, these wafers are shipped back to Taiwan for dicing, testing, and packaging.
That means chips labeled “Made in America” aren’t truly finished here. But the company’s plans for its Arizona-based packaging facility will allow it to package and test in the U.S.
TSMC plans to make all-American chips a reality before 2030.
Now, this story isn’t a new one, especially when it comes to China. And neither is the opportunity to capitalize on it…
The “NMIC” Trend
Back in September 2020, I identified a new megatrend: “Made in America… Or at Least NOT Made in China.”
NMIC, for short.
As I said to my paid subscribers at the time…
“Made in China” is becoming both a political and supply-chain risk for numerous companies in the United States and elsewhere… [A] growing number of Western companies are moving to eliminate or reduce Chinese production from their supply chains, if they can do so responsibly and cost-effectively.
A shift to “Made in America” would be the optimal outcome for many of these companies, but the first order of business is simply to establish production that is “Not Made in China.”
Prior to the Covid-19 pandemic, America’s growing reliance on Chinese production of numerous goods seemed mildly galling, but convenient.
Although we didn’t like exporting manufacturing jobs overseas, we didn’t mind buying China-made goods for a fraction of what the U.S.-made equivalent would cost.
Then came the pandemic. Suddenly, we Americans discovered that we had become overly reliant on China for various products. And so, ramping up U.S. production of key raw materials and products became “Priority No. #1” in boardrooms across America.
I realized that U.S. companies would reduce or eliminate Chinese production from their supply chains. So, I recommended Australia-based, rare-earths producer Lynas Rare Earths Ltd. (LYSCF).
Lynas is the largest producer of rare earth minerals outside of China, and the company a stood to benefit from the “NMIC” trend.
And boy, has it. Lynas has climbed as high as 700% since then.
The “Not Made in China” trend is gearing up again. But this time, the biggest opportunity lies in the “Made in America” half.
And it’s not just limited to the semiconductor industry.
I can say without hyperbole that tech firms, energy companies, drugmakers, automakers, and even entire countries have pledged to unleash a tidal wave of cash on our country.
Here’s why…
U.S. Soil Is Getting Richer
Trillions of dollars are earmarked to flood into our country over the next five years. Yes, trillions with a “T.”
InvestorPlace Senior Analysts Louis Navellier, Luke Lango, and I have assembled a list of over 127 separate entities that have pledged to invest anywhere from $300 million to $1.3 trillion in the American comeback.
This list includes everyone from Big Tech companies like Amazon.com Inc. (AMZN) and Alphabet Inc. (GOOGL)…
To pharmaceutical giants like Eli Lilly and Co. (LLY) and Johnson & Johnson (JNJ)…
To automakers like Ford Motor Co. (F), blue chips like The Hershey Co. (HSY), and even companies you’ve most likely never heard of.
Sovereign nations are also getting in on the act. The United Arab Emirates, Qatar, Japan, and the European Union are pitching in at least $1 trillion apiece.
In the next few years, these powers will spend a grand total of $11.3 trillion to build and expand semiconductor plants, data centers, and more…
All on U.S. soil.
This is a brand-new, homegrown industrial revolution. It’s the American Dream 2.0.
And we’ll likely never see a revolution of this magnitude again. So, Louis, Luke, and I teamed up to identify nine stocks that reflect the upside potential of this multitrillion-dollar homecoming.
We’ve put everything you need to know about these picks in our free American Dream 2.0 broadcast.
And tomorrow, we’ll be releasing an additional recommendation. It’s a San Jose, California-based firm that provides end-to-end manufacturing services for the optical, electronics, and mechanical industries.
It specializes in products that use printed circuit boards (PCBs), which include virtually all modern electronic devices.
So, this company is poised to benefit from the demand for American-made, AI-related hardware.
Regards,
Eric Fry
