U.S. Re-Shoring and Trade Tensions: How Semiconductor Stocks Are Poised to Win

The U.S.-China trade war has evolved into a full-scale tech cold war, with semiconductors at the epicenter. As the Biden administration tightens export controls on advanced chip technology to China and accelerates domestic manufacturing through the CHIPS Act, investors are turning to undervalued semiconductor stocks positioned to thrive in this fractured landscape. These companies are not only benefiting from massive subsidies but also fortifying supply chains to meet U.S. national security demands.

The Geopolitical Catalyst: U.S. Re-Shoring Under the CHIPS Act

The Chips and Science Act of 2022 allocated $39 billion to rebuild U.S. semiconductor capacity, with over $33 billion already awarded to companies like Intel ($INTC), Taiwan Semiconductor Manufacturing (TSM), and GlobalFoundries (GFS). The goal is clear: reduce reliance on China's supply chain and secure production of chips critical to AI, defense, and advanced manufacturing.

The grants have already triggered $540 billion in private investments, with projects creating over 500,000 jobs. But with $6 billion remaining unallocated and the incoming Trump administration's skepticism toward federal subsidies, companies must prove their alignment with U.S. strategic priorities to secure funding.

Key Metrics: Why Now Is the Time to Act

• Global semiconductor sales: Grew 19% to $627 billion in 2024, driven by AI and data center demand.
• U.S. chip manufacturing share: Fell to 12% in 2022 from 37% in 1990—CHIPS Act aims to restore this to 20% by 2030.
• Export controls: New U.S. rules ban sales of 14nm or better chips to China without a license, impacting $13 billion in annual sales.

Top Picks: Undervalued Stocks with Catalyst-Driven Upside

1. Micron Technology (MU)

• Why Buy Now:
• Undervalued by 165% (per intrinsic value analysis).
• Supplies DRAM and NAND memory for AI servers, a sector expected to grow at 15% CAGR through 2030.
• Secured $6.1 billion in CHIPS Act grants to build U.S. factories, reducing reliance on Chinese suppliers.
• Catalyst: Micron's New York facility begins production in 2026, aligning with surging demand for high-performance memory.

2. Taiwan Semiconductor Manufacturing (TSM)

• Why Buy Now:
• 81% undervalued, despite dominating 55% of global foundry market share.
• Its Arizona fab (funded by $6.6B in CHIPS grants) will begin 3nm production in 2025, critical for U.S. AI and military chips.
• Benefits from U.S. export controls, as its advanced nodes are banned from China.
• Catalyst: TSMC's “Silicon Shield” strategy could secure $100B in Pentagon contracts for secure chip production.

3. Qualcomm (QCOM)

• Why Buy Now:
• 73% undervalued, with $11.7B in free cash flow.
• Diversified into automotive (serving Ford, BMW) and 5G infrastructure, sectors insulated from trade tensions.
• Secured CHIPS Act funds for Texas facilities, supporting its Snapdragon chip dominance.
• Catalyst: Qualcomm's automotive revenue grew 30% in 2024; its leadership in connected car tech is unmatched.

4. Applied Materials (AMAT)

• Why Buy Now:
• 14.5% undervalued, but critical to U.S. semiconductor infrastructure.
• Supplies equipment for 90% of global chip manufacturing, including CHIPS Act-funded fabs.
• R&D spending rose 15% in 2024 to develop tools for 2nm and EUV lithography.
• Catalyst: Applied's $5.9B in free cash flow and 38.5% earnings power make it a rare “defensive” semiconductor play.

5. Advanced Micro Devices (AMD)

• Why Buy Now:
• Undervalued by 5%, but poised for a breakout.
• Gained 21% in data center revenue in 2024, challenging Intel's dominance.
• Its AI accelerators (MI300X) are being adopted by Microsoft and Meta for large language models.
• Catalyst: AMD's “Secure Enclave” partnership with the Pentagon could unlock $3B in CHIPS Act grants.

Risks and Considerations

• Political Uncertainty: A Trump administration may slow CHIPS Act funding, though finalized projects are likely to proceed.
• Supply Chain Volatility: Silicon wafer shortages could delay fab expansions.
• Cyclical Downturns: The semiconductor industry's historical 3–5 year cycles mean 2026 could see oversupply.

Investment Strategy: Buy the Dip, Focus on Diversification

Investors should allocate 5–7% of a tech portfolio to these names, prioritizing TSM (long-term dominance) and MU (memory plays). Pair with AMAT for equipment exposure and QCOM for diversification. Avoid pure-play Chinese names like SMIC or ASML's Dutch competitors.

The U.S.-China tech divide isn't going away. Companies that secure CHIPS Act grants, insulate supply chains, and dominate AI-driven demand will outperform. The time to act is now—before the next wave of trade controls reshapes the sector forever.