Semiconductor Resurgence: Navigating U.S.-China Trade Barriers for Strategic Gains

The U.S.-China trade war has evolved into a high-stakes battle for dominance in the semiconductor industry, where tariffs, intellectual property (IP) disputes, and supply chain shifts are reshaping valuations. For investors, this turmoil presents a unique opportunity to capitalize on undervalued U.S. semiconductor firms positioned to thrive under the CHIPS Act and reduced Chinese competition in advanced chip manufacturing.

The CHIPS Act: A Catalyst for U.S. Semiconductor Revival

The CHIPS and Science Act has injected over $32.5 billion in grants and loans into domestic semiconductor projects, accelerating the reshoring of advanced manufacturing. Taiwan Semiconductor Manufacturing Company (TSMC)'s $65 billion Arizona fab project—backed by a $6.6 billion CHIPS grant—epitomizes this shift. The facility will produce 2nm chips for AI and high-performance computing, with tariff exemptions ensuring cost competitiveness.

Meanwhile, Micron Technology's $200 billion investment in U.S. memory chip production—supported by $6.16 billion in CHIPS funds—aims to secure domestic dominance in DRAM and NAND. These projects, coupled with workforce development programs, are creating over 500,000 jobs and strengthening supply chain resilience.

Trade Barriers and IP Dynamics: A Double-Edged Sword

The U.S. has intensified export controls targeting advanced semiconductor technologies, restricting sales of 14nm-or-better chips to China. In retaliation, Beijing banned exports of critical raw materials like gallium and germanium, disrupting global supply chains.

Here, DeepSeek's AI chip breakthrough serves as a case study. The U.S.-based startup, backed by $1.5 billion in venture capital, recently unveiled a 5nm AI chip that bypasses Chinese IP claims through domestic design and fabrication. This innovation underscores how U.S. firms can outmaneuver IP disputes by leveraging domestic ecosystems.

Supply Chain Reshoring and Undervalued Opportunities

The trade war has forced companies to diversify supply chains, favoring U.S. manufacturers. For instance, Intel's $3 billion “Secure Enclave” project—funded by the CHIPS Act—will produce semiconductors for national security applications, reducing reliance on Taiwan and South Korea.

The market, however, has yet to fully price in these tailwinds. Take Applied Materials (AMAT), a key supplier of semiconductor manufacturing equipment. Despite its critical role in enabling U.S. fabs, AMAT's P/E ratio of 18.5 remains below its 5-year average of 23. This undervaluation presents a buying opportunity as CHIPS-funded projects ramp up.

Investment Strategy: Long Positions in CHIPS Act Winners

Investors should prioritize U.S. semiconductor leaders with direct CHIPS Act ties and exposure to advanced nodes:

1. TSMC (TSM): Benefiting from tariff exemptions and 2nm leadership, TSMC's stock has underperformed in 2025 despite its strategic importance. A visual of its stock price over three years shows room for rebound.
   

2. Intel (INTC): Its shift to IDM 2.0—combining internal fabrication with foundry services—positions it to capture $100 billion in AI and HPC chip demand. A PEG ratio of 0.8 signals undervaluation relative to growth prospects.

3. Micron (MU): With $6.16 billion in CHIPS funds and a 15% undervaluation based on EV/EBITDA multiples, MU is poised to capitalize on rising memory chip demand from AI and automotive sectors.

Risks and Considerations

• Geopolitical Volatility: Escalating tariffs or IP disputes could delay project timelines.
• Talent Shortages: The U.S. needs 100,000+ skilled workers annually, though CHIPS-funded training programs are addressing this.

Conclusion: Position for a Semiconductor Renaissance

The U.S. semiconductor sector is undergoing a structural shift, driven by CHIPS Act funding, trade barriers, and innovation. Investors who allocate to firms like TSMC, Intel, and Micron now will benefit as domestic production scales and Chinese competition in advanced chips falters. The time to act is now—before valuations catch up to reality.