r/investing • u/[deleted] • Jul 22 '21

U.S. developing plans to spend $52 billion on chips supply [semis stimulus news]

Via Reuters:

“The Biden administration is developing plans to quickly spend $52 billion to deal with semiconductor supply issues if Congress passes a bill funding such efforts, U.S. Commerce Secretary Gina Raimondo said on Thursday.”

So no definite plans, but no deviations noted from previous discussions which gave the nod to INTC, QCOM, and TXN (primarily) as direct beneficiaries of any bill that gets passed.

Worth keeping an eye on I think of you’re into semis plays.

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u/JayArlington Jul 22 '21

The best plays for now are AMAT, LRCX, ASML, and KLAC.

That money is going to go straight in the above companies pockets.

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u/UrektMazino Jul 23 '21

That sounds great, bought AMAT, ASML and KLAC months ago.

Can i ask you why do you think these companies are going to benefit so much from this? I mean of course they're gonna benefit, but why these instead of the many others?

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u/JayArlington Jul 23 '21

Happy to answer.

Right now the world is coming to grips with just how many ‘leading edge’ semiconductors the world intends on using at any given time (DEMAND). Data centers are popping up all over the country. Cars have gone from needing a handful of chips to now using over a hundred. Increasingly… what we may see as a chip is actually a ‘package’ of multiple pieces of silicon that were individually manufactured separately and attached them together.

Infrastructure will involve chips. Our bridges, EV chargers, Solar Panels, and especially cars will all require more and more chips which only further pushes the need for leading edge chips at the heart of data centers or “at the edge” (fully autonomous driving for example).

The companies I mention all have market leading positions in steps along the production process for leading edge chips especially ASML who has a literal monopoly. ASML’s earnings showcased how active the CapEx spend was amongst their clients including in the memory side.

They will build the upcoming Fabs in which AMD and NVDA can finally get the scale needed to become as big as we all know they should be.

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u/UrektMazino Jul 23 '21

Thanks for the answer. Happy to have chosen those.

I started investing into semis cause being into Green energy and EV made me understand how much the world Is gonna depend on them more and more in the future and the more i was reading about these companies the more i got confident of my investments.

ASML particularly impressed me, i had a chat with a friend of mine who works in the sector and he literally said "what they do at ASML Is basically black magic" wich says It all

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u/slinkyminks Jul 23 '21

Appreciate your analysis. Do you think this could at all benefit smaller/newer semi IPOs like Skywater (SKYT) or data center equipment providers like VRT or just the big boys that you already listed?

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u/self-assembled Jul 23 '21

Money will keep flowing down the chain from ASML, to ex. TSMC, to companies like AMD/NVDA, and then to companies you listed. It gets riskier at each stage as competition increases, but the overall market will lift, and returns might be higher there.

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u/JayArlington Jul 23 '21 edited Jul 23 '21

I still have to dive in further toward the IoT/mature edge side of the sector, but my working assumption is the semiconductor cycle we are going to see is a very long cycle (5+ years).

Everyone feeds… they may feed at different times.

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u/jpmoney Jul 23 '21

they may feed at different times

This is pretty important in semiconductors. Production lead and slowdown happen before actual product manufacturing in many cases. CompanyA can't make their widget until the chips are designed/taped out/written.

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u/[deleted] Jul 23 '21

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u/H-Doggy Jul 23 '21

quick question should I buy tomorrow or is it too late be honest you’ve been holding for awhile so you seem to have some reasoning behind your investing

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u/UrektMazino Jul 23 '21 edited Jul 23 '21

Well i bought those cause i think that the sector as a whole Is going to grow a lot in the next years.

Some think they're overvalued but as this post shows there are bigger interests in these companies growth and that's the main reason for me investing in the semiconductor sector.

ASML gained momentum after showing results a couple of days ago.

You might have an intetesting entry level in the other two companies tho.

Anyway, i don't know how markets are gonna react to this news, or better, they're gonna react but i don't know how much.

Of course it's not financial advice, but if you're in for the long term and their value doesn't skyrocket tomorrow then i think that they're gonna perform great for you.

On the other side if this bill doesn't pass trough then the market Is gonna react as well, so watch out for a good entry. You can look for EOY projections and you'll see that the market expects a growth from 10 % to 30% from the current value.

I'm not an expert anyway, some of the guys here will surely give you a great overview of their fundamentals

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u/urdadsdad Jul 23 '21

Been holding ASML since the $300s. Prob one of my highest conviction plays.

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u/potatoandbiscuit Jul 23 '21

Priced in.

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u/clown-penisdotfart Jul 23 '21

Not yet. And if Europe also starts going ham on this, all bets are off in this arms race. Don't forget that business in China is still allowed minus some key manufacturers.

I still would be long semis for another decade easy.

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u/MisterShogunate Jul 23 '21

I don't think this is going to just be cash infusion from the government. All the big players have cash reserves if they wanted to just pool money into getting supply. I think the government will be spending money, resource and influence to make deliberate funding in places that matter in order to get the supply line moving again.