U.S. Economic Security

A recent report highlights an intensifying strategic competition between the U.S. and China for leadership in foundational technologies like AI, quantum, and biotechnology, projecting a combined annual economic value of $29 trillion by 2040. The U.S. faces critical vulnerabilities, including substantial reliance on China for key supply chain components (e.g., rare earths, biotech inputs) and underinvestment in these sectors, contrasted with China's $900 billion investment over the past decade and a $138 billion venture fund. To safeguard U.S. economic and national security, the report recommends targeted government interventions such as onshoring critical semiconductor manufacturing, accelerating utility-scale quantum computing through DoD procurement, establishing national biomanufacturing hubs, securing critical minerals, and enhancing export controls and enforcement via a new Economic Security Center.

Analysis

The report highlights an intensifying strategic competition between the U.S. and China across foundational technologies: AI, quantum computing, and biotechnology, projected to generate $29 trillion in annual economic value by 2040. China's aggressive investment, totaling $900 billion over the past decade and a new $138 billion venture fund, significantly outpaces U.S. efforts, leading to rapid advances in areas like AI model performance and biotech innovation. This dynamic poses a direct threat to U.S. economic growth and technological leadership.

The U.S. faces critical vulnerabilities, including substantial reliance on China for key supply chain components such as 70% of rare earths and 80% of biotech key starting materials. Private capital underinvestment in quantum and biotech, evidenced by a 65% drop in early financing for U.S. biotech startups in H1 2025, further exacerbates this gap. China's dominance in drug inputs and its increasing share of global biotech patents (28% in 2019) underscore its growing leverage.

To counter these challenges, the report recommends targeted government interventions, including onshoring critical semiconductor manufacturing with $4.5 billion in public incentives and accelerating utility-scale quantum computing via $1.3 billion in DoD procurement. Establishing national biomanufacturing hubs and enhancing export controls with increased penalties are also proposed. These measures aim to de-risk supply chains, mobilize private capital, and secure U.S. leadership in these critical sectors.

Key Decisions for Investors

• Investors should closely monitor escalating U.S.-China geopolitical tensions and their potential to disrupt global supply chains, particularly in AI, quantum, and biotechnology.
• Evaluate companies with significant reliance on Chinese supply chains or R&D partnerships for potential regulatory and operational risks, considering the proposed U.S. de-risking initiatives.
• Consider opportunities in domestic U.S. manufacturing, critical minerals, and advanced technology sectors (AI, quantum, biotech) that stand to benefit from substantial government incentives and procurement, such as MP Materials.
• Anticipate increased government intervention through industrial policy, export controls, and investment screening, which will reshape market dynamics and create both risks and opportunities in strategic technology areas.