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Cashing in on chips

Taiwan Semiconductor Manufacturing (NYSE:TSM) is set to make history with one of the largest foreign investments in the United States. The company will announce plans today to build its second chip plant in Arizona, increasing its investment in the state to $40B. The event will be attended by President Biden, as well as CEOs who will benefit from the increase in American chip production, like Apple's (NASDAQ:AAPL) CEO Tim Cook, Micron's (NASDAQ:MU) Sanjay Mehrotra and Nvidia's (NASDAQ:NVDA) Jensen Huang.

Cutting edge: TSMC previously disclosed a $12B investment plan to build its first factory in Arizona that was slated to manufacture 5-nanometer chips (and later changed to 4-nanometers) with mass production expected in 2024. Construction on the second site that will make 3-nanometer chips (the tiniest "die shrink" available today) will start in the coming year, with production set to begin in 2026. Once the plants come online, they are expected to deliver enough chips to meet U.S. annual demand of 600K wafers per year, according to Ronnie Chatterji, White House Coordinator for CHIPS Implementation at the National Economic Council.

"It's the foundation of our personal electronics, and also the future of quantum computing and AI," Chatterji declared. "That's the definition of supply chain resilience. We won't have to rely on anyone else to make the chips we need." Warren Buffett recently took a major position in TSMC in a bet that the world cannot do without silicon.

Go deeper: The passage of the CHIPS and Science Act in early August helped provide certainty to companies like TSMC to expand their footprint in the U.S. The bill included $52B in loans, grants and other incentives, as well as billions in tax credits to support domestic semiconductor production. Washington has been worried about reliance on microchips made in Taiwan for years, but the dependence became more apparent during the pandemic, when supply chain issues affected everything from cars and electronics to healthcare equipment and advanced weapons systems. (4 comments)

View from the top

Things aren't looking so bright for the U.S. economy as American CEOs laid out their outlook in the latest index from the Business Roundtable. The CEO Economic Outlook Survey, which measures conditions over the next six months, declined 11 points from last quarter to 73, continuing a downward trend that has taken shape over the past year. The index even dipped below its long-run average of 84 since Q3 of 2020, though it remains above the expansion or contraction threshold of 50.

What it means: CEOs see slower hiring, softer sales and decreased capital investment in the near-term, but the economy isn't facing a critical crisis or full-scale recession. 2023 will likely see a growth slowdown as the Fed pumps the brakes to rein in inflation, though it won't be accompanied by widespread unemployment or systematic consequences.

"To strengthen the economy, Business Roundtable urges Congress and the Administration to undertake pro-growth policies, including restoring full and immediate expensing of American R&D investments this session and reforming the permitting system to expedite energy infrastructure projects," said Business Roundtable CEO Joshua Bolten. "We urge U.S. policymakers to position America for the strongest economic recovery possible," added GM (GM) CEO Mary Barra, who chairs the Business Roundtable. "Sound policy action in the short term will yield long-term economic benefits and lay a solid foundation for our growth and competitiveness."

Other stats: 49% of the 142 Business Roundtable CEOs identified labor costs as their top cost pressure, followed by 15% who flagged material costs and 14% who mentioned supply chain disruptions. Other leading pressures were associated with energy and regulatory costs.

New lows

Another shakeup at Salesforce (CRM) is continuing to shake up the stock. Stewart Butterfield, the head of Slack, will leave the messaging and communications company that Salesforce acquired for $27B in August 2021. His departure follows another high-profile exit last week, which saw Salesforce co-CEO Bret Taylor - who is credited as the architect of the Slack deal - leave the company to return to his "entrepreneurial roots."

Fine print: Butterfield said in a statement that his exodus had "nothing to do with Bret [Taylor's] departure," and that his leaving the cloud business software company had "been in the works for several months!" "As hackneyed as it might sound, I really am going to spend more time with my family (as well as work on some personal projects, focus on health and generally put time into those things which [are] harder to do when one is leading a large organization)."

Don't forget that Gavin Patterson, Salesforce president and strategy chief, recently said he would leave the firm in January, while Mark Nelson, president and CEO of Salesforce’s Tableau product, tweeted last Thursday that it was his last day on the job.

Outlook: Executives jumping ship isn't the only thing worrying investors. Salesforce last week reported Q3 revenue growth of 14%, marking its slowest expansion since its IPO in 2004 (and declined to provide guidance for the next fiscal year). The stock tanked on the news, which came along with Taylor's resignation, while shares yesterday slumped another 7.3% to $134 to mark their lowest level since the pandemic selloff in March 2020. (22 comments)

New(s) threat

A bill known as the Journalism Competition and Preservation Act is gaining traction in Congress that could enable "final offer" arbitration, sometimes called "baseball arbitration," for the remuneration of online content. Smaller publishers argue that it would level the playing field by allowing news organizations to band together for a larger share of the advertising revenue pie, though Big Tech feels quite the opposite. In fact, Facebook-owner Meta (NASDAQ:META) has even threatened to remove news content from its U.S. platform, in a case that resembles warnings seen Down Under after similar legislation passed in Australia last year.

Quote: "If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government-mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions," tweeted Meta spokesperson Andy Stone.

"The Journalism Competition and Preservation Act fails to recognize the key fact: publishers and broadcasters put their content on our platform themselves because it benefits their bottom line - not the other way around. No company should be forced to pay for content users don't want to see and that's not creating a meaningful source of revenue. Put simply: the government creating a cartel-like entity which requires one private company to subsidize other private entities is a terrible precedent for all American businesses."

How did things end in Australia? Facebook went through with a threat by banning news from its website in March 2021, but reversed the decision several days later by brokering a deal with the government. Among the amendments was a clause stipulating that digital platforms and news groups would be required to mediate for two months before subjecting them to mandatory arbitration. The government would also take into account existing commercial agreements and give digital platforms a month's notice before reaching any final decision on the law's application. (7 comments)

Poll Results

Thanks to everyone who participated in Wall Street Breakfast's 'Survey Monday.' The poll garnered close to 700 responses and showed a sizable bullish outlook for oil. 73.4% of the replies see the next stop for U.S. West Texas Intermediate at $90, compared to 26.6% who think the crude oil benchmark will first hit $70.

Today's Markets

In Asia, Japan +0.2%. Hong Kong -0.4%. China flat. India -0.3%. In Europe, at midday, London -0.3%. Paris -0.2%. Frankfurt -0.2%. Futures at 6:30, Dow -0.1%. S&P flat. Nasdaq +0.1%. Crude -1.1% to $76.03. Gold +0.4% to $1788.40. Bitcoin -2% to $16,955. Ten-year Treasury Yield -3 bps to 3.57%

Today's Economic Calendar

8:30 Goods and Services Trade

Companies reporting earnings today »

What else is happening...

ISM Services Index unexpectedly turns higher in November.

Exxon (XOM) lifts base pay for CEO Woods, other top executives.

California's Newsom proposes legislation to hit oil company profits.

SCOTUS declines Centripetal's appeal in Cisco (CSCO) patent case.

Block (SQ) tumbles 7% as rising yields and costs hit fintechs.

Antisemitism controversy: Nike (NKE) cuts ties with Kyrie Irving.

Layoffs spreading? PepsiCo (PEP) plans to cut hundreds of jobs - WSJ.

Herbalife (HLF) tumbles 10% AH on proposed $250M private offering.

Natural gas sinks on forecasts for milder weather across the U.S.