While President Donald Trump’s tariff war aims to spark a manufacturing boom at home, corporate America’s spending focus remains firmly on “bits” rather than “bricks and mortar.”

This contrast is evident in the spending patterns of the Magnificent 7 (Mag 7) stocks – a group comprising large-cap tech companies, including Alphabet (parent company of Google), Amazon, Apple, Meta Platforms (parent company of Facebook and Instagram), Microsoft, Nvidia, and Tesla.

These firms are expected to cumulatively spend an astonishing $650 billion this year on capital expenditure (capex) and research and development (R&D), according to data tracked by Lloyds Bank. That amount is larger than what the U.K. government spends on public investments in a year, the bank noted in a Thursday note.

If that number alone doesn’t impress you, consider this: the total economy-wide investment spending on IT equipment and software has continued to surge this year, accounting for 6.1% of GDP, while both private fixed and fixed non-residential investment, excluding IT, have shrunk for consecutive quarters.

FOMO and AI

According to Lloyds’ FX Strategist Nicholas Kennedy, the decline in investments across other sectors of the economy could be due to several reasons, including the fear of missing out (FOMO) on the artificial intelligence (AI) boom.

“There might be some explanations other than a crowding out by IT spending and political/trade uncertainties that you could call on; the building boom that was triggered by Biden’s CHIPS act, which boosted structures, has faded, for instance. There is also a FOMO effect at work, firms encouraged to divert investment resources from what they traditionally do towards fashionable AI-related projects. So they’re just spending elsewhere,” Kennedy said in a note to clients.

The chart indicates that U.S. corporate spending on IT equipment and software has increased to $1.45 trillion, representing a 13.6% year-over-year rise. The tally makes up over 40% of the total U.S. private fixed investment.

The U.S. second-quarter GDP estimate, released by the Bureau of Economic Analysis early this week, showed that private fixed investment in IT increased by 12.4% quarter-on-quarter.

Meanwhile, investment in non-IT sectors or the broader economy fell by 4.9%, extending the three-quarter declining trend.

From ‘bricks’ to ‘bits’

This continued dominance of “bits” spending in corporate America should calm the nerves of those worried that the administration’s focus on manufacturing may suck capital away from technology markets, including emerging avenues like cryptocurrencies.

Bitcoin and NVDA, the bellwether for all things AI, both bottomed out in late November 2022 with the launch of ChatGPT and have since enjoyed incredible bull runs, demonstrating a powerful correlation between technology’s rise and the crypto market.

“Whether that [AI spending boom] generates a return is another matter, but it does reshape plans towards bits from bricks,” Kennedy said.

Moreover, the crypto market has also found a significant tailwind in the form of a favourable regulatory policy under Trump. The administration has demonstrated its pro-crypto bias through the signing of several key pieces of legislation aimed at clarifying regulatory oversight for digital assets and stablecoins, including measures that have garnered bipartisan support. Additionally, the administration has made strategic appointments to financial regulatory bodies.

Taiwan Semiconductor Manufacturing (TSM 0.24%) may not design artificial intelligence (AI) chips, but it’s a company that every AI chipmaker relies on. The AI giants rely on TSMC to manufacture their number-crunching chip designs. That’s why TSMC is the safest long-term play in the AI infrastructure space.

Let’s look at what makes the company so special.

The foundry leader

TSMC is the world’s most advanced semiconductor foundry, and it counts the world’s leading chip designers among its top customers, including Nvidia, Advanced Micro Devices, Broadcom, and Apple. It has the scale and technological leadership that rivals can’t match. Intel has been burning cash trying to establish its foundry business, while Samsung’s yield issues continue to be an issue. That has given TSMC a huge market share lead in the advanced node market, and it’s not particularly close.

Nodes refer to the size of the transistors used on a chip, measured in nanometers. The smaller the node, the more transistors can be packed onto the chip, which boosts performance and power efficiency. Smaller nodes are becoming a bigger part of TSMC’s mix. Chips made on 7nm and smaller nodes made up 73% of its revenue in the first quarter, up from 65% a year ago. Its 3nm node accounted for 22% of revenue, and Apple has booked much of its 2nm supply for future products. Even Intel has been using TSMC’s 3nm tech for some of its most advanced chips. That says a lot.

TSMC’s clear leadership in the space has also given the company strong pricing power. Between increasing demand and higher prices, this is driving both strong revenue growth and improved gross margins. Last quarter, its revenue jumped 35% to $25.5 billion, led by growth in high-performance computing (HPC). That continued in Q2, with the company reporting preliminary revenue growth of 39% to $31.9 billion, as estimated by Reuters.

Margins remain strong despite new fabs ramping. Gross margin rose 190 basis points to 58.8% in Q1 despite its Arizona and Japan fabs still ramping up and weighing on profitability. TSMC expects these newer facilities to dilute margins by 2 to 3 percentage points this year, but the company is already raising prices to offset the pressure. According to reports, TSMC will increase AI chip prices this year, with Arizona-made chips potentially commanding a 30% premium.

TSMC’s business risks

TSMC is not entirely without risks. Geopolitical tensions around Taiwan will always be part of the story, and it’s not immune to tariffs and policy shifts in the U.S. However, TSMC is already addressing both by expanding its footprint globally. The company has been building new fabs in the U.S., Japan, and Europe in partnership with its largest customers.

However, what makes TSMC the safest AI semiconductor stock is its position in the semiconductor value chain. It ultimately doesn’t matter which company wins the AI chip race. TSMC’s success is tied to overall AI chip demand, not any one company’s products.

AI chip demand isn’t slowing down, either. TSMC previously projected AI-related revenue to grow at a mid-40% compounded average growth rate (CAGR) over the next five years, starting in 2024. It’s also working closely with customers to time its capacity expansion accordingly. With its top customers booking future supply, it has solid visibility into future growth.

Meanwhile, it could see a tailwind beyond AI with autonomous driving. Robotaxis are beginning to take off and gain traction, and all of those vehicles will need to be fitted with advanced chips. It’s still early, but if robotaxis and autonomous driving become commonplace, TSMC will be a big beneficiary.

A semiconductor wafer being manufactured.

Time to buy the stock

In the AI chip battle, TSMC is essentially the AI arms dealer. It doesn’t need to bet on who will dominate the chip market, because it sells manufacturing services to all of them. For investors who want exposure to AI semiconductors without betting on a single chipmaker, TSMC is the safest way to play it.

The stock is also attractively valued, trading at a forward price-to-earnings (P/E) ratio of 24 times based on analysts’ 2025 estimates and a price/earnings-to-growth ratio (PEG) of less than 0.7. Stocks with PEG ratios below 1 are typically considered undervalued.

Taken all together, TSMC is one of the best and safest stocks to buy in the semiconductor space right now.

Dan Ives, global head of technology research at Wedbush Securities, believes it’s unrealistic for Apple to move iPhone production onshore, despite the White House agenda to bring manufacturing home.

In a new CNBC interview, the investor points out that Apple has made a smart move by creating a manufacturing base in India to diversify its supply chain and reduce reliance on China.

But with President Trump threatening to slap 25% tariffs on iPhones manufactured outside the US, Ives says Apple investors are now in a tough spot because he doesn’t think it’s feasible for the tech giant to uproot its global supply chain.

“It’s a Pinocchio story – the reality of actually having iPhone production in the US. Because in my opinion, that will take four to five years, $20 to $30 billion, even to move 15% to 20% of the supply chain. And then if you actually produce the iPhone in the US, you’d be looking at $3,500 iPhones. 

So I view it as Apple’s situation, they tried to pivot around India and that was a smart strategy and now their backs are against the wall. It was a Twilight Zone day today for any Apple investor, given Apple has done all the right things in terms of pivoting out of China and now [they’re] saying come to the US – that’s a fairy tale.” 

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Generated Image: Midjourney

Recap: The Raspberry Pi 5 was launched in 2023, delivering more than twice the performance of the previous generation. The board was also instrumental in bringing a small, yet significant change in how the UK foundation is actually printing its single-board computers. By changing the way Raspberry Pi boards are assembled and components are soldered, the maker improved its operations in what it described as “massive” ways.

Raspberry Pi Hardware Engineer Roger Thornton explained the change in a recent blog post. Working with its manufacturing partner Sony, the UK organization gradually implemented a soldering technique known as intrusive reflow soldering.

The new method improved production quality, reduced e-waste, and lowered the company’s environmental impact, Thornton stated.

Intrusive reflow was first used to produce Raspberry Pi 5 boards and is now being applied to earlier models as well. This new manufacturing process resolved the inefficiency issues caused by previous soldering methods, which relied on distinct through-hole connectors and surface mount technology (SMT) machines.

Through-hole connectors require strong solder joints made through the printed circuit board and cannot be handled by the SMT machines that place individual parts.

In the early days of Raspberry Pi production, parts were inserted by hand before being handled by robots. A subsequent soldering step, where boards passed through a molten solder bath, was used to secure everything in place.

The improvements led to a 50 percent reduction in product returns, a 15 percent increase in production speed, and a yearly reduction of 43 tonnes of CO₂ emissions.

The whole process was complex, costly, and time-consuming. Now, thanks to intrusive reflow, through-hole connectors can be placed using the same machines that install SMT parts. Raspberry Pi perfected the method after several trials, adjusting the solder paste stencil and refining the PCB layout until the company’s quality standards were met.

The improvements led to a 50 percent reduction in product returns, a 15 percent increase in production speed, and a yearly reduction of 43 tonnes of CO₂ emissions. Raspberry Pi’s manufacturing now requires less machinery and inventory, with no production line interruptions due to work-in-process inventory.

Raspberry Pi says that intrusive reflow soldering was key to eliminating “wasteful” intermediate steps in the manufacturing process. The company now highlights its reduced environmental impact and improved efficiency, which align with its ongoing efforts to become a more responsible and sustainable organization.