Reallocating CHIPS Act Funds to Critical Minerals: Strategic Implications for U.S. Mining and Tech Sectors

The U.S. semiconductor industry's reliance on foreign-sourced critical minerals has long been a blind spot in national supply chain strategy. While the CHIPS and Science Act of 2022 poured $280 billion into domestic chip manufacturing, it left a gaping hole in securing upstream inputs like gallium, germanium, and rare earth elements—materials China dominates in production and refining. This oversight became glaring in 2023 when Beijing imposed export restrictions on gallium and germanium, sending shockwaves through global tech markets. Now, a strategic reallocation of CHIPS Act funds to critical minerals is reshaping the U.S. industrial landscape, offering investors a unique opportunity to hedge against geopolitical risks while capitalizing on a sector poised for explosive growth.

The Strategic Shift: From Chips to Minerals

The Trump administration's 2024–2025 initiatives have redirected $2 billion from the CHIPS Act to bolster domestic critical mineral supply chains. This pivot reflects a broader recognition that semiconductors cannot thrive without secure access to materials like lithium, nickel, and rare earths. The Department of Commerce, under Secretary Howard Lutnick, is deploying a mix of grants, equity stakes, and Defense Production Act (DPA) subsidies to accelerate projects in mining, refining, and recycling. For instance, MP Materials—the sole U.S. rare earths miner—has secured a $3.5 billion investment from the Pentagon, including a 15% equity stake and guaranteed price floors. Similarly, Albemarle Corp, the world's largest lithium producer, is expanding its North American refining capacity with federal support.

The Department of Energy (DOE) has further amplified this push with $1 billion in new funding programs, including a $500 million grant for battery material processing and a $135 million initiative to refine rare earths from unconventional sources like mine waste. These efforts are not merely about reducing China's grip on supply chains; they aim to create a self-sustaining ecosystem where U.S. firms dominate both extraction and advanced manufacturing.

Investment Opportunities in Mining and Tech

The reallocation of CHIPS Act funds is unlocking value across two sectors: mining and processing firms and technology companies dependent on critical minerals.

1. Mining and Processing Firms:
2. MP Materials (MP): As the U.S.'s only rare earths miner, MP Materials is a direct beneficiary of federal subsidies and equity investments. Its Mountain Pass mine in California is expanding to refine rare earths domestically, a process previously outsourced to China. With the Pentagon's guaranteed offtake and price floors, MP's margins are insulated from market volatility, making it a compelling long-term play.
3. Albemarle Corp (ALB): The lithium giant is leveraging CHIPS Act funds to build a $2.5 billion lithium hydroxide plant in Texas, part of a broader push to localize battery material production. Albemarle's partnerships with automakers and tech firms position it to capture a growing share of the EV and semiconductor markets.

4. Critical Minerals Co (CRMI): A smaller player, Critical Minerals is developing a rare earth separation facility in Georgia with $100 million in federal grants. Its focus on high-purity rare earths—essential for semiconductors and defense tech—makes it a niche but high-conviction opportunity.

5. Technology Companies:

6. Intel (INTC) and Samsung (SSNLF): These chipmakers are indirectly benefiting from the mineral reallocation. By securing stable supplies of gallium and rare earths, they can avoid production bottlenecks and reduce exposure to geopolitical shocks. Intel's $3 billion “Secure Enclave” program, funded under the CHIPS Act, is a case in point.
7. Applied Materials (AMAT): As a supplier of semiconductor manufacturing equipment, Applied Materials relies on critical minerals for its tools. A diversified mineral supply chain reduces its input costs and enhances its competitive edge against Asian rivals.

Hedging Against Geopolitical Risks

The reallocation of CHIPS Act funds is not just an economic strategy—it's a geopolitical insurance policy. China's dominance in rare earths (90% of global refining capacity) and gallium (80% of production) gives it leverage to disrupt U.S. tech and defense sectors. By diversifying mineral sources and building domestic refining infrastructure, the U.S. is reducing its vulnerability to export controls and trade wars. For investors, this means:
- Reduced volatility: Companies with federal contracts or subsidies are less exposed to commodity price swings.
- Long-term demand: The semiconductor and EV industries will require 50% more critical minerals by 2030, per the DOE.
- Policy tailwinds: The Trump administration's aggressive use of the DPA and streamlined permitting processes ensures rapid deployment of projects.

Conclusion: A Dual-Track Investment Strategy

For investors seeking to hedge against U.S.-China supply chain vulnerabilities, the reallocation of CHIPS Act funds offers a dual-track approach:
1. Direct exposure: Invest in mining and processing firms like MP Materials and Albemarle, which are central to the new mineral ecosystem.
2. Indirect exposure: Target tech companies that benefit from a secure supply chain, such as Intel and Applied Materials.

The key is to balance high-growth mining plays with established tech firms that can capitalize on reduced input costs and geopolitical stability. As the U.S. races to decouple from China's mineral dominance, the winners will be those who align with the administration's industrial strategy—and investors who act early will reap the rewards.