Are semiconductors the new oil?

These chips have a significant impact on the US economy and the US government is concerned it hasn’t protected its national interests.

In an effort to increase onshore production of semiconductors, the US Senate passed a bill that would provide $52B in incentives for domestic semiconductor plants. The Senate hopes that these plants will help ease the chip shortage and protect US interests.

Semiconductor stocks have rallied in response to the potential bill passage, with companies like Nvidia $NVDA, AMD $AMD, and Qualcomm $QCOM all up more than 20% from recent lows.

Although this is big news for the entire sector, the industry is fragmented so we broke down how each component may benefit!

Designers like AMD $AMD, Nvidia $NVDA, and Qualcomm $QCOM architect new chips. These companies may benefit through increased chip fabrication capacity, which should decrease manufacturing costs and in turn, would show up as higher net income margins.

Chip designers rely on software solutions from companies like Cadence $CDNS and Synopsys $SNPS. If the designers gain new business, these stocks may also benefit from increased demand. Cadence is up 67% and Synopsys is up 78% in the past two years.

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