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Here’s a geopolitical nightmare scenario that keeps defense hawks and tech executives up at night: nearly 100% of the world’s advanced AI chips are manufactured in one place, Taiwan, by one company, TSMC. If China were to invade Taiwan, the global supply of the silicon brains powering artificial intelligence would essentially vanish overnight.
That’s the argument Elon Musk has been making with increasing urgency. In a March 2025 podcast appearance with Senator Ted Cruz, Musk laid out his case that the US needs to dramatically scale up domestic chip fabrication to protect its lead in the AI race.
The Taiwan problem
TSMC’s dominance in advanced chip fabrication is well documented. The company produces the overwhelming majority of the world’s most sophisticated semiconductors, the kind needed to train and run large AI models.
Musk told Cruz that the US would “likely lead in AI for the next few years,” but that leadership is contingent on one critical variable: who controls AI chip fabrication. A Chinese move on Taiwan wouldn’t just be a military crisis. It would be a technological one, severing access to the chips that underpin everything from cloud computing to autonomous vehicles.
Putting money where the warning is
Tesla has reportedly struck a $16.5 billion contract with Samsung for the production of its AI5 and AI6 chips at Texas-based facilities.
Meanwhile, xAI, Musk’s AI venture, has joined consortia with companies like Microsoft and BlackRock to strengthen US AI infrastructure.
These moves align with the broader push under the CHIPS and Science Act, the federal legislation designed to incentivize semiconductor manufacturing on American soil. The law has already spurred billions in planned investments from Intel, TSMC itself, and Samsung, all building new fabrication plants across the US.
The next bottleneck: power
In early 2026, Musk noted that AI chip production capacity was increasing at an exponential rate. But he warned that the electrical power supply needed to actually run those chips might not keep pace, resulting in a scenario where the US produces more AI chips than it can power on.
Musk has predicted that later in 2026, the US may find itself in exactly this position: chip-rich but power-poor.
What this means for investors
For anyone with exposure to tech markets, Musk’s warnings highlight a two-stage investment thesis that’s already reshaping capital flows.
Stage one is the semiconductor buildout. Companies involved in domestic chip fabrication, from equipment makers to foundry operators, stand to benefit from sustained government incentives and private sector demand. Samsung’s Texas expansion and TSMC’s Arizona plant are the most visible examples.
Stage two is the energy bottleneck. If Musk is right that chip production will outstrip power availability, then companies providing energy solutions for data centers become critical infrastructure plays. That includes everything from natural gas generation to nuclear power to grid-scale battery storage.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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