When an AI-powered chatbot is asked a question, the data travels through the cloud to a company’s servers many miles away. The AI model processes the question and sends back a response, all seemingly within the blink of an eye. But there is far more to AI than chatbots. AI is increasingly used to treat our illnesses, grow our food, and defend our nation. This AI boom requires chips, or semiconductors, and it requires a lot of them. They need to be smaller, cheaper, faster, and more energy efficient.¹ In many ways, chips are at the heart of the latest global tech race.²

By the end of 2022, the U.S. accounted for nearly half of the world’s chip sales but ranked fifth for production behind Taiwan, South Korea, Japan, and China. Taiwan accounts for half of the world’s chips with the market dominated by one company: Taiwan Semiconductor Manufacturing Co. (TSMC). TSMC accounts for 50% of the global market and makes chips for big tech companies like Nvidia, AMD, and Apple.³

In an effort to capture more of the global market share, the Biden Administration passed the CHIPS and Science Act of 2022. The bill provides $280 billion over ten years to invest in chip innovation and production in the U.S. While the U.S. produced 37% of the world’s chips in the 1990s,⁴ it only produced 10% in 2022.⁵ With the help of the CHIPS and Science Act, the U.S. market share is expected to grow 203% by 2032.⁵ 

Two years after the CHIPS and Science Act was signed into law, 70 semiconductor fabrication plants are now under construction in Arizona and Texas, with many more in the works in other states.⁴ The CHIPS and Science Act also pledged billions of dollars in loans and direct federal funds to both TSMC and Intel, another global chip manufacturing leader, for their domestic production expansion efforts.¹

Big tech companies like Amazon, Microsoft, and Google have been investing in startups and their own chip products for several years, hoping to take some market share from Nvidia, which holds a near global monopoly on advanced chips powering the AI boom.¹ Other countries like China, Japan, the EU, and India have similarly begun funding their own domestic chip supplies to keep up with demand, boost innovation, and improve national security.¹ China in particular has been buoying its own industry to fill a nebulous vacuum left by the U.S. federal government’s attempts to ban the sale of advanced chips to its greatest military and economic rival.²

As nations and companies race for supremacy, the semiconductor industry is estimated to be the second most profitable industry in the world with the second highest R&D spending.⁴ The global semiconductor market is expected to reach $1 trillion by 2030.⁴ 

All of this growth and investment in chips will impact a variety of sectors, from tech and healthcare to government and transportation. Such a robust enabling technology epitomizes the TrueShares Technology, AI & Deep Learning ETF (LRNZ), which seeks to provide thematic exposure to a concentrated portfolio of companies that apply advanced AI within their businesses. Many of the 20-30 holdings are users or makers of chips, including category killer Nvidia, which plans to release an even more advanced chip later this year.² Put another way: “If the AI boom is a gold rush, Nvidia is selling the picks and shovels.”²

For LRNZ’s current holdings, click here.

1. https://www.technologyreview.com/2024/05/13/1092319/whats-next-in-chips/
2. https://www.nytimes.com/2024/09/04/podcasts/the-daily/china-chip-ai.html
3. https://worldpopulationreview.com/country-rankings/semiconductor-manufacturing-by-country
4. https://www.mckinsey.com/industries/public-sector/our-insights/the-chips-and-science-act-heres-whats-in-it 
5. https://www.semiconductors.org/america-projected-to-triple-semiconductor-manufacturing-capacity-by-2032-the-largest-rate-of-growth-in-the-world

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Disclosures

The TrueShares AI & Deep Learning ETF (AI ETF) is also subject to the following risks: Artificial Intelligence, Machine Learning and Deep Learning Investment Risk – the extent of such technologies’ versatility has not yet been fully explored. There is no guarantee that these products or services will be successful and the securities of such companies, especially smaller, start-up companies, are typically more volatile than those of companies that do not rely heavily on technology. Foreign Securities Risk -The Fund invests in foreign securities which involves certain risks such as currency volatility, political and social instability and reduced market liquidity. Growth Investing Risk – The risk of investing in growth stocks that may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company’s growth potential. IPO Risk – The Fund may invest in companies that have recently completed an initial public offering that are unseasoned equities lacking a trading history, a track record of reporting to investors, and widely available research coverage. IPOs are thus often subject to extreme price volatility and speculative trading. New Issuer Risk – Investments in shares of new issuers involve greater risks than investments in shares of companies that have traded publicly on an exchange for extended periods of time. Non-Diversification Risk – The Fund is non-diversified which means it may be invested in a limited number of issuers and susceptible to any economic, political and regulatory events than a more diversified fund.