Ever heard of Taylor, TX?
Neither have most people in Texas.
It’s between my home in Austin and ranch two hours east.
But Taylor isn’t just some small town.
A giant South Korean company is building a 6 million-square-foot plant there. At a $17 billion price tag. And that’s just the beginning.
There is a massive shift going on. A shift not many people are paying attention to and Central Texas, ironically, is at the center of it.
This will impact the whole world even though it’s in the very early stages.
For investors in the know, they will be able to ride this shift for years to come.
Here at Intelligent Income Daily, we make it our job to be in the know. And to find you the safest income-generating ideas to help you consistently and reliably boost your bottom line.
Today, I’m going to explain this under-the-radar trend and provide you with a free pick to profit from it.
America is Re-Industrializing
As covered by Bloomberg, there is a seismic shift happening in manufacturing. Last year in the U.S., there was a 116% increase in the construction of new manufacturing facilities.
And in the past, a lot of those buildings would be in China.
Not anymore. And I will explain why in a moment.
Now they are in Taylor, TX. And Bay Minette, AL, Osceola, AR, and Phoenix, AZ. To name a few.
That’s because America is re-industrializing. A trend we at Wide Moat Research are following very closely.
Hundreds of billions of dollars are coming back to the U.S. for manufacturing.
And nowhere is that greater than the semiconductor industry.
Intel is spending over $100 billion on new chip factories outside of Columbus, OH.
The idea is to move advanced chipmaking to the U.S. that’s currently dominated by Taiwan Semiconductor Manufacturing Company Limited (TSM).
TSM has 57% of global market share. That makes it a big risk to everyone, and I’m not exaggerating.
We need those chips for the military, healthcare system, and your iPhone.
But it’s even worse than it seems, Intel uses TSM to build its advanced chips. So does Nvidia (NVDA) and Advanced Micro Devices (AMD).
These advanced chips are the ones we really need. And today, they are all made on the tiny island of Taiwan. The one that’s 100 miles from China, our far from friendly neighbor.
And the market doesn’t realize that TSM and its competitors are investing hundreds of billions into chip manufacturing in the U.S.
During the pandemic, many overseas facilities weren’t operating. And that was the case until recently in China.
The accountants at these chip makers ran the numbers. The savings from lower cost labor didn’t add up.
Throw in some political and currency risk, and it’s not a hard sale to setup shop in the U.S. If China invades Taiwan, it won’t be able to trade with the rest of the world in the same manner it did previously.
And as tensions rise worldwide, the likelihood of everyone’s manufacturing facilities being impacted rise as well. That’s why manufacturing is coming back to the U.S. And you will see a re-industrialization of America.
The semiconductor industry alone is projected to grow from $573 billion in 2022 to $1.38 trillion in 2029. That’s massive growth. And the key is picking the right horse.
So what are your options?
How to Profit from It
Samsung is the company spending $200 billion in Central Texas. But the stock no longer trades on U.S. exchanges. While it’s number 2 behind TSM in chips by volume, its profits were down 69% last quarter. Its financials aren’t great. The business involves a lot more than chips.
Intel just cut its dividend by two-thirds. Its preserving cash so it can build all those facilities. It’s probably a decent buy long-term, but it’s far from the best.
Our recommendation is Nvidia (NVDA). NVDA is the closest rival to TSM when it comes to advanced chips. That’s because it designs these chips. That’s where the money is. Margins are way better than manufacturing.
The chips it designs dominate the gaming market, which is expanding worldwide. And their capabilities in artificial intelligence (AI) are second to none. Total AI spending was about $37 billion in 2020. That doubled to $77.5 billion in 2021. The most recent estimate for 2022 was $450 billion. That’s greater than 10 times its spending budget for AI in 2020, and only three years later.
Nvidia announced earnings just a few days ago on February 23. It beat expectations and analysts raised their price targets to a median of $255 and high of $325. Today, the stock trades around $236. So this is the perfect time for you to buy.
At Wide Moat Research, we specialize in finding the best ideas to preserve and grow your wealth. That includes uncovering hidden opportunities and seeing key trends before the crowd.
We think Nvidia has huge upside long-term. Nvidia benefits from all the trends we’ve talked about. The improving manufacturing footprints of companies like TSM, Samsung, and Intel are accelerating Nvidia’s success.
Nvidia is also at the epicenter of the AI revolution. The company has an extremely strong A- credit rating and has posted positive net income for 10 straight years.
The valuation isn’t cheap at a 47 P/E ratio (a price-to-earnings ratio is determined by dividing a stock’s current share price by its earnings per share over a 12-month period). But it’s reasonable given the company’s margins and growth profile. It’s also 40% below the all-time high of $330 per share set in late 2021.
We share even more hidden trends in our latest service, High-Yield Advisor. Brad and I are watching many macro shifts take place and want you to be poised to profit from all of them. To learn more about this service check out Brad’s presentation here.
You won’t regret it. And if you are watching on a computer or a smart phone, just remember there is a chip inside that in the coming years ahead will be made in America.
Stephen Hester, CFA
Analyst, Intelligent Income Daily