Congress is scared stiff of China’s growing technological power. Indeed, this week Congress dropped the gloves so to speak. In fact, the Senate passed the U.S. Innovation and Competition Act. A massive bill pouring $200 billion plus on China’s ambition to dominate new technologies.
Ultimately, the goal is to blunt China’s influence over 5G, quantum computing and artificial intelligence.
The big problem is semi-conductors. Over 90% of the semi-conductor supply chain is in Southeast Asia. Obviously, this sets up supply chain issues. For example, American manufacturers like Ford Motor Company relay on basic chips to run ABS braking and other systems. So, relying on China is not an option for lawmakers as American auto workers twiddle their thumbs.
Surely, Intel Corp. (INTC: nasdaq) will get a big chunk of the money as they build a brand new chip fabrication plant in Arizona.
Better yet, Taiwan Semiconductor (TSM: nyse), the world’s largest semi-conductor manufacturer, announced plans to begin making chips in Arizona as well. In like manner, expect cash to end up in the coffers of TSM.
In contrast, it’s rare that Washington spending bills hit their target. More often, it’s just wasted tax payer money. But this time they are correct to attack China head on. After all, competition to build next generation technologies like artificial intelligence, quantum computing and 5G is a good idea.
Top Semi-Conductor ETFs and Stocks
Conclusion
In the end, on Tuesday Congress blessed semi-conductor investors with their massive spending bill. Rarely does a tailwind like this consume a sector like this. Savvy investor’s should consider jumping on this trend early before the momentum algos kick in and drive prices higher.
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