Investment Idea

Biden's $280B “Chip and Science Act” – What is the Taiwanese hedge?

Carlsquare

11 Aug 2022 | 1 min read

Yesterday US president Joe Biden signed a bipartisan bill to strengthen U.S competitiveness with China on chip manufacturing. The bill, called “The Chips and Science Act”, will give US chip manufacturing companies roughly $52 billion as well as billions in tax breaks, to encourage investments in the semiconductor industry.

The Taiwanese-based sector favourite, TSMC, has dominated in technology and market share but the imminent and growing geopolitical risk with China has dragged the stock down to a PE level below its 2017-2022 average. Viewing some of the US companies in the chip manufacturing pool, valuations have moved somewhat similar during 2022 with NVIDIA having the highest PE valuation and INTEL the lowest.

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

Looking strictly at valuations, a buy on INTEL could be a favourable sector hedge boosted by the Biden administration, against the geopolitical uncertainty in Taiwan.

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence

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