Oil has been in the news since the start of the Iran war, but it's not the only natural resource facing disruptions. Qatar provides about a third of the global helium supply, and on Feb. 28, Iranian drone strikes hit QatarEnergy's Ras Laffan Industrial facility, one of only two in the world capable of producing semiconductor-grade helium.
Although it appears the U.S. and Iran may be close to a peace agreement, the facility may not be fully operational again for months. Chipmakers don't have that long. They use helium for wafer cooling, leak detection, and photolithography, and semiconductor foundries generally only have about one week of helium inventory.
U.S.-based foundries are at a strategic advantage, as they source most of their helium from domestic and Algerian suppliers, and reshoring should accelerate in the wake of this latest supply chain disruption. For investors looking to benefit from that trend, two growth stocks stand out.
Image source: Getty Images.
Intel has delivered an exciting turnaround
As the largest chip manufacturer in the U.S., Intel (INTC +13.79%) arguably benefits most from reshoring, which could help it win back some of Taiwan Semiconductor Manufacturing's (TSM 0.84%) dominant market share. Intel's share of the foundry market is less than 5%, compared to 64% for TSMC.
However, Intel has made an impressive turnaround. Intel's 18A process node started high-volume production earlier this year at the company's Ocotillo campus in Chandler, Arizona. Intel reports that the 18A delivers up to 15% better performance per watt and 30% better chip density over the previous Intel 3 process node.
NASDAQ: INTC
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Intel has been able to fund its build-out at a lower cost due to government support, as the Biden and Trump administrations have prioritized moving semiconductor production back to the U.S. The federal government invested $11.1 billion in Intel from multiple sources, including the CHIPS Act and the Security Enclave program, in exchange for a 9.9% stake in the company. That funding has helped bridge the cost gap, since U.S. fabs cost more than those in Taiwan, South Korea, and Singapore.
Intel stock has already soared this year -- it's up 197% as of May 7. But its customer base is expanding. It secured deals with Tesla, which agreed to use Intel's 14A node process, and with Alphabet's Google, which plans to collaborate with Intel on custom ASICs. Apple is also reportedly in talks with Intel as a fabrication partner. If the helium crunch drives more tech companies to domestic manufacturing, Intel's U.S.-based production capabilities are a valuable asset.
TSMC is expanding U.S. operations
I touched on TSMC earlier, and a Taiwanese company may seem like an odd choice for a reshoring play. However, TSMC is investing heavily in U.S. operations. Last year, the company announced it would increase its total U.S. investment to $165 billion to fund three new fabs, two advanced packaging facilities, and an R&D center at its Phoenix, Arizona, complex. In January, CFO Wendell Huang said that TSMC would continue to expand that investment.
TSMC is the leading semiconductor foundry by a wide margin, and its first Arizona fab is now making chips for Nvidia and Apple. The U.S. facilities expand TSMC's production capacity and allow it to benefit from the push to reshore semiconductor manufacturing.
NYSE: TSM
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While TSMC isn't insulated from the helium crunch, it's in a better position than many competitors, particularly those in South Korea, which sources most of its helium from Qatar. TSMC obtains helium from multiple suppliers, tries to keep excess stock on hand at all times, and uses helium recycling systems.
Both of these semiconductor stocks have their advantages. Intel is a more natural fit to benefit from reshoring, since it's a U.S. company and the federal government now owns a sizable position in it. However, the valuation has soared, and it currently trades at over 100 times forward earnings. TSMC is much more affordable, at 27 times forward earnings, and has a much larger market share.
Each is worth considering as a reshoring investment, and you may want to own both, considering they play crucial roles in the AI build-out.
