The Reshoring Trade: CHIPS, IRA, and Buy-American

The CHIPS and Science Act directs tens of billions in direct grants and loans to companies building semiconductor fabrication plants ("fabs") in the U.S., plus a 25% investment tax credit for qualifying chip-manufacturing equipment. The goal is straightforward: the U.S. makes a shrinking share of the world's advanced chips, and that's treated as a national-security exposure given how concentrated leading-edge production is in Taiwan. The IRA, despite its climate framing, is functionally an industrial policy bill — it uses uncapped tax credits (45X production credits, 48C investment credits, and consumer/commercial credits tied to domestic content) to make it cheaper to build and operate battery, solar, and clean-energy manufacturing inside the U.S. than to import. Buy American rules, strengthened by executive action and codified through agencies like the FAR Council, require an increasing percentage of domestic content in anything the federal government purchases directly or funds through infrastructure grants, which pulls demand toward U.S.-based industrial suppliers regardless of who wins the politics of any given year.

The mechanism that ties all three together is simple: government money changes the after-tax return on building in America versus building abroad, and companies respond to after-tax returns. That's why this is a durable, structural trade rather than a news-cycle story — the incentives are baked into statute and regulation, not into a press release.

The most direct beneficiaries of CHIPS Act grants are the companies building the fabs themselves. Intel (INTC) has been the largest single recipient of CHIPS Act direct funding for its Arizona, Ohio, and New Mexico expansions, making its domestic manufacturing buildout partially a government-subsidized capital program rather than a pure private bet. Micron Technology (MU) has similarly tied major New York and Idaho memory-chip fab expansions to CHIPS awards. Texas Instruments (TXN) is expanding Texas and Utah wafer fabrication capacity with CHIPS support layered on top of its existing domestic footprint. GlobalFoundries (GFS) is a pure-play specialty foundry that has leaned on CHIPS funding to expand its New York and Vermont facilities.

The less obvious but arguably more reliable beneficiaries are the equipment and materials suppliers who get paid regardless of which fab wins in the long run — every new fab, whichever company owns it, needs the same category of tools. Applied Materials (AMAT), Lam Research (LRCX), and KLA Corporation (KLAC) sell the deposition, etch, and inspection equipment that every fab buildout requires, and they benefit from fab construction volume broadly rather than the fortunes of any single chipmaker. Industrial gas suppliers like Air Products and Chemicals (APD) and Linde (LIN) supply the ultra-pure gases fabs consume continuously, creating a recurring revenue stream once a fab is operational, not just a one-time construction bump.

The IRA's Section 45X production tax credit pays manufacturers a per-unit credit for domestically produced battery cells, modules, solar components, and critical minerals processing, which is why battery and solar manufacturers have announced a wave of new U.S. plants since 2022. Albemarle (ALB) sits at the raw-material end, processing lithium domestically to help qualify downstream battery makers for full credit value. On the equipment and automation side, companies that sell the manufacturing lines for batteries and solar modules see order volume tied directly to how many new domestic plants get built, independent of which end-brand ultimately wins market share.

First Solar (FSLR) stands out as the clearest single-company case study: it manufactures solar panels domestically using cadmium telluride technology that qualifies for outsized 45X credits, and its order book and margins are directly and transparently linked to the credit's value, which is disclosed in its own financial reporting. On the industrial-equipment side, Eaton (ETN) and Vertiv Holdings (VRT) benefit from the broader buildout of power infrastructure needed to support new domestic manufacturing capacity — transformers, switchgear, and power management for facilities that didn't need that capacity when production was overseas. Nucor (NUE) and Steel Dynamics (STLD), as domestic steel producers, benefit indirectly: reshored factory construction consumes structural steel, and Buy American content rules on federally connected projects favor domestic mills over imports.

Buy American rules don't create a single dramatic winner the way a CHIPS grant announcement does; instead they create a durable demand floor for domestic industrial suppliers across federal procurement, infrastructure spending, and defense contracts. Companies with the biggest exposure to federal and federally funded state infrastructure work get a structural tailwind because an increasing share of the total addressable market simply excludes foreign competitors by rule. Caterpillar (CAT) and Deere & Company (DE), while not defense contractors, sell equipment used on federally funded infrastructure projects where domestic-content thresholds apply. Defense primes like Lockheed Martin (LMT), RTX Corporation (RTX), and General Dynamics (GD) operate in a market where Buy American and Berry Amendment requirements are already the baseline, insulating their core government revenue from the kind of offshoring pressure that affects purely commercial manufacturers.

The way to think about Buy American as an investor is as a multiplier on existing government-facing revenue rather than a new revenue source: it doesn't hand a company new customers, but it protects and grows the share of existing federal and federally adjacent spending that flows to domestic suppliers instead of import competitors, which matters most for companies where government-linked revenue is already a meaningful percentage of the total.

The most reliable way to track this trade is to follow the money at its source rather than the headlines about it. The Commerce Department publishes CHIPS Act award announcements, and Treasury and the IRS publish guidance updates on IRA credit qualification (45X, 48C, and domestic-content bonus adders); both are public, dated, and specific about which companies and facilities are named. Company 10-Ks and 10-Qs are the second-best source — semiconductor, battery, and solar manufacturers receiving material tax credits are generally required to disclose the impact on revenue, margins, or effective tax rate, so search a company's recent earnings call transcripts and filings for "45X," "48C," or "CHIPS" to see whether management is quantifying the benefit or flagging exposure to a credit's expiration or a change in interpretation.

A second durable signal is capital-expenditure activity itself: when an equipment maker like Applied Materials or Lam Research reports backlog or bookings growth concentrated in U.S. fab customers, that is a forward-looking read on reshoring activity that shows up before the fab itself is operational. Industrial real estate data — vacancy rates and construction starts for manufacturing and warehouse space tracked by commercial real estate research firms — is a third useful proxy, since new fabs and battery plants show up as regional construction booms well before the underlying company reports revenue from them. Finally, track legislative durability directly: because these are statutory tax credits and appropriated funds rather than discretionary spending, the real risk to this trade is a future Congress amending or sunsetting specific credit provisions, so credit phase-down and expiration dates are worth bookmarking as calendar risk rather than assuming any incentive is permanent.

The reshoring trade is durable but not risk-free, and the risks are structural rather than sentiment-driven. Labor and construction costs in the U.S. are meaningfully higher than in Asia, so subsidies narrow but don't eliminate the cost gap — if credit values are reduced or capped in future legislation, some announced projects could be delayed, downsized, or canceled, as has already happened with a handful of battery and solar projects since 2023. A second risk is execution: building a leading-edge fab or a battery gigafactory is a multi-year undertaking with real technical risk, and several announced U.S. projects have already seen construction delays or scaled-back plans, meaning theoretical demand for equipment and materials can run ahead of what actually gets built.

A third risk is that the credits are explicitly tied to domestic content thresholds that ratchet up over time, so companies that don't localize their supply chains aggressively enough can lose credit eligibility even after breaking ground — a nuance worth checking in a company's own disclosures rather than assuming every announced project automatically qualifies for the full credit.