Strategic Capital for National Security

AI, Semiconductors, and the Future of American Sovereignty

The technologies that underpin the future of warfare, industrial productivity, and global economic leadership—semiconductors and artificial intelligence (AI)—are increasingly dual-use in nature. They are as vital to battlefield decision-making and hypersonic weapons as they are to autonomous vehicles and digital commerce. The United States, long the global leader in these domains, now faces a stark inflection point. 

A recent investigation by the U.S. House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party (CCP) revealed a disturbing trend: American venture capital firms, including Sequoia Capital, GGV Capital, Qualcomm Ventures, GSR Ventures, and Walden International, have channeled billions of dollars into hundreds of Chinese technology companies that directly support the CCP's military objectives, human rights abuses, and global ambitions to replace American technological leadership. The Committee’s investigation found that Walden, alone, has invested up to $2.2 billion in 140 unique investments. 

This paper outlines the critical threat posed by such capital misalignment, presents a deeper understanding of the semiconductor supply chain—including often-overlooked mature-node infrastructure—and introduces the mission and strategy of AI Infrastructure Partners (AIIP) as a model for a new doctrine of strategic capital investment. 

The CCP’s Technological Offensive: Capital as a Vector of Strategic Risk 

The Select Committee’s report presents a clear and sobering thesis: U.S. investment capital has not merely enabled the growth of China’s AI and semiconductor industries; it has accelerated the CCP’s efforts to weaponize these sectors against U.S. interests. 

As the report notes, “artificial intelligence and semiconductor technologies are necessary components of the CCP’s Orwellian surveillance state and human rights abuses” and form the technological base for the People’s Liberation Army’s (PLA) modernization campaigns (Select Committee Report, 2024). 

Among the findings, Sequoia Capital was found to have invested over $1.4 billion into ByteDance, a company that collaborates with Chinese propaganda and surveillance agencies. ByteDance has hosted Xinjiang police units on its Douyin platform and worked with CCP authorities to monitor Hong Kong protestors. Walden International, meanwhile, directed more than $50 million into Semiconductor Manufacturing International Corporation (SMIC), China’s largest and most advanced foundry, with known links to PLA weapons systems. Walden also invested over $35 million into SJSemi after it had been placed on the U.S. Commerce Department’s Entity List for military ties. 

This capital has flowed not only in the form of dollars but also in the form of intangible support—strategic guidance, technology transfer, talent access, and credibility. As the Committee report makes clear, “VC firms act almost as consultants for target companies,” helping them scale, recruit, expand internationally, and even navigate U.S. regulatory headwinds. 

LTG (ret) Ross Coffman, President of Forward Edge-AI and Founder of Ross Coffman and Associates, warns, "There are two common misconceptions when it comes to both China and the CCP. They will not self-contain during conflict in the South China Sea and they are absolutely focused on dominating each and every world market."

The Cost of Capital and the Soul of a Nation: Commentary from Damon Pitler 

In a country defined by market dynamism and technological leadership, America now finds itself at a dangerous crossroads. The financial economy has increasingly decoupled from the real economy, with speculation, arbitrage, and share buybacks masquerading as prosperity, while the foundations of wage growth, industrial productivity, and manufacturing resilience crumble. 

In his poignant article “The Weight of Capital,” AI Infrastructure Partners’ Managing Director of Investments, Damon Pitler, reflects on the consequences of this misalignment. Citing decades of disinflationary offshoring, monetary distortion, and capital concentration, Pitler warns that the country has sacrificed its industrial soul for the illusion of short-term affluence. 

“Almost overnight, we are trying to reverse the fallout of several decades of sacrificing our defense capabilities and undermining our domestic industrial manufacturing base. We have neglected the importance of real productivity and wage growth and instead continue binging on free refills of debt-fueled, deficit expansion and cheap, cheaply made, goods for which we pay our adversaries in Dollars.” 
— Damon Pitler, “The Weight of Capital” (2024)  

Pitler argues that the problem is not merely one of policy—it is systemic. The current structure of the U.S. economy rewards capital for short-term asset appreciation while penalizing long-term investment in physical production. The result is a cost of capital regime that inhibits the expansion of domestic manufacturing, technical training, and job creation. 

“The real economy is at an impasse with the financial economy,” he writes. “We cannot call it a free market economy when discretionary consumption is exclusive to platinum card holders.”  

According to Pitler, the antidote is not austerity—but a conscious reallocation of capital toward entrepreneurs, builders, manufacturers, and real asset operators. The U.S. government must lower the cost of productive credit, take risks to reshore industry, and build economic infrastructure that empowers the American workforce. 

His vision aligns perfectly with AI Infrastructure Partners’ thesis: that real prosperity is not speculative—it’s built. It is forged in fabs, tooling shops, foundries, and data infrastructure. It is sustained by wages, training, and long-term returns—not meme stocks and debt-fueled dividends. 

“We must signal to the world that we are willing to take the risks and socio-economic body shots necessary to resuscitate our industrial base,” Pitler concludes. “Hopefully, our elected representatives agree saving democracy is worth the risk.”  

This perspective reinforces AIIP’s mission to redirect American capital away from fragile, extractive finance and into the essential layers of the real economy—where defense, dignity, and economic security converge. 

Semiconductors as Strategic Infrastructure: A Holistic View of Supply Chain Vulnerabilities 

Much of the policy and media focus has centered on advanced-node chips—those produced at 5nm and below, predominantly in Taiwan by TSMC. While this region is a critical chokepoint, it is not the only one. The broader semiconductor supply chain is a deeply interconnected and capital-intensive system, with several critical leverage points, including design software, materials, equipment, fabrication, packaging, and test infrastructure. 

Put simply, “From outer space for communication satellites to medical devices, and IOT devices, semiconductors have become integral to daily life. Without a secure supply chain of chips, we are truly jeopardizing the engine of our society." — Justin Weinstein, Principal Engineer & Member of the Technical Staff, GlobalFoundries 

Understanding this system holistically is essential to crafting an effective industrial strategy. Rebuilding U.S. resilience requires investment not only in leading-edge fabs, but in the full spectrum of supporting infrastructure—including the frequently overlooked industrial manufacturing base and mature-node ecosystem built around 200mm wafer fabrication. 

The Case for Mature Nodes: Strategic Relevance in a High-Performance Age 

In public discourse around AI infrastructure, attention tends to focus on cutting-edge chips—NVIDIA H100s, 3nm chiplets, and trillion-parameter model training clusters. However, as highlighted in a recent industry article authored by AIIP leadership, 200mm semiconductor fabs—often producing at nodes like 180nm, 130nm, or 65nm—remain vital to AI deployment, power systems, industrial controls, and defense platforms. 

“AI runs on the latest and greatest chips,” the article explains, “but it relies on the old ones for essential functionality” (“Why 200mm Fabs Still Matter,” 2024). These mature-node fabs are the backbone of analog, power management, and RF components that support edge AI, robotics, sensor systems, electric vehicles, and secure communications. 

A 2024 U.S. Department of Commerce report confirms that “at least two thirds of respondents’ products likely contain chips manufactured by PRC-based foundries,” yet visibility into the origins of those chips remains dangerously low. “44 percent of surveyed companies were unable to determine whether their products contained any chips manufactured by PRC-based foundries” (BIS, 2024). 

The report concluded that “China is expected to account for almost half of all new capacity to manufacture mature-node semiconductors” over the next 3–5 years, and warned that “continued capacity expansion in China prevents foundries outside of China from making the necessary investments” (BIS, 2024)​. 

These practices, fueled by PRC subsidies, have introduced downward pricing pressure that “threatens the competitive position of market-driven firms” and risks flooding the market with artificially cheap chips (BIS, 2024). 

If AI systems are the engines of innovation, these older chips are the brakes, steering, and fuel lines. No one notices them until they fail—and when they do, the entire system collapses. 

Yet most of the global mature-node capacity today is offshore—in Taiwan, China, and Japan. A geopolitical disruption in East Asia could paralyze entire sectors of the U.S. economy and defense industrial base not through advanced chip shortages, but through the absence of “supporting silicon.” 

Strategic Players Allied Mature Node Infrastructure 

A cohort of U.S. and allied companies is working to rebuild trusted, domestic 200mm capacity. These include: 

• SkyWater Technology, operating a U.S.-owned, defense-trusted fab in Minnesota and expanding in Texas through the acquisition of an Infineon facility. 

• Tower Semiconductor, with significant analog and photonics capabilities in San Antonio, Texas. 

• GlobalFoundries, a major domestic supplier & trusted foundry of mature-node analog and RF chips from its Vermont site. 

• Wolfspeed, transitioning to 200mm silicon carbide production to support high-efficiency power delivery systems for AI data centers and electric vehicles with manufacturing in North Carolina & New York. 

• Analog Devices, a vertically integrated manufacturer supporting industrial and defense-grade edge AI applications from its Massachusetts and Oregon fabs. 

Each of these players supports essential links in the national AI and defense ecosystem. Strengthening them represents a high-leverage, cost-effective strategy for national resilience. 

The Strategic Foundation: Rebuilding America’s Industrial Manufacturing Base 

The ability to lead in semiconductors and artificial intelligence is not merely a function of intellectual property, venture capital, or digital infrastructure. It is inseparably tied to America’s industrial manufacturing base. From wafer handling tools to vacuum components, from materials synthesis to thermal packaging—AI and semiconductors are physical technologies, and they require physical manufacturing. 

Over the past three decades, the U.S. has ceded significant portions of its manufacturing footprint—particularly in complex, capital-intensive, and precision-driven sectors. This offshoring, once seen as economically efficient, has now become a strategic liability. 

As AI Infrastructure Partners Managing Partner Jason Frank has observed through first-hand leadership in scaling a domestic sub-fab manufacturing company: 

“You can’t decouple digital innovation from physical capacity. We’ve seen how fragile the value chain is when one component breaks—whether it’s etch equipment, gas delivery, or power conditioning systems. If we don’t have the industrial base to support these systems here at home, then we don’t really own the future of AI or semiconductors.” 
— Jason Frank 

Manufacturing as the Missing Middle Layer 

For decades, U.S. policy and investment have focused heavily on two ends of the spectrum: upstream R&D and downstream consumer technology. But the “missing middle”—industrial-scale production, tooling, materials, and systems integration—has been underfunded, underprioritized, and increasingly outsourced to East Asia. 

This middle layer is where semiconductor scale-up happens. It’s where AI infrastructure becomes durable and deployable. And it’s where economic resilience is either built—or lost. 

Without domestic capability in: 

• Semiconductor capital equipment 

• Advanced packaging and test 

• Thermal, RF, and power subsystem manufacturing 

• Robotics and precision automation 

• Industrial AI hardware 

• Specialized chemical & material manufacturing  

…the U.S. cannot maintain a sovereign AI stack. Nor can it respond rapidly to supply chain disruptions or geopolitical crises. 

From Passive Policy to Industrial Strategy 

Public-private initiatives like the CHIPS and Science Act represent a historic opportunity—but only if they are matched by private capital that understands the industrial logic of AI and semiconductors. Industrial strategy must now become an investing strategy. 

The goal is not to recreate the past—it is to build a next-generation industrial manufacturing base, one that is leaner, digitally integrated, export-capable, and aligned with strategic national interests. 

AI Infrastructure Partners is actively investing in companies that: 

• Modernize and scale U.S.-based manufacturing 

• Build supply chain resilience in semiconductor tooling 

• Enable secure and efficient deployment of AI at the edge and in infrastructure 

• Train and employ a new generation of American industrial talent 

America cannot win the 21st-century technological race on services and software alone. It must once again become a country that builds what it invents. 

The AI Infrastructure Partners Approach: Capital with Strategic Intent 

AI Infrastructure Partners exists to provide the capital that scales sovereign, resilient, and strategically vital AI infrastructure. Our investment focus spans capital equipment, subsystems, and services in the semiconductor, energy infrastructure, and data center markets. 

We are not application-chasers—we are infrastructure builders. Our strategy targets the industrial backbone necessary to support long-term U.S. technological sovereignty. That includes advanced compute, but also legacy silicon. It includes software platforms, but also physical manufacturing. 

Through AIIP, we extend operational acumen and long-horizon view to capital deployment across the essential layer of AI Infrastructure. 

Rebalancing Trade to Rebuild the American Industrial Base 

For the United States to lead in semiconductors and AI infrastructure, it must first reclaim its position as the world’s premier industrial power. Trade policy—too long guided by abstractions of efficiency and consumer pricing—must now be retooled to serve a national strategy of industrial renewal. 

The past four decades of globalization hollowed out America’s manufacturing capacity. In the pursuit of “free trade,” the U.S. offshored not only assembly lines, but critical capabilities: process engineering, industrial automation, high-precision machining, and advanced materials manufacturing. These were not just jobs—they were the muscle memory of industrial leadership, and we let it atrophy. 

The National Interest Demands Industrial Repatriation 

AI and semiconductor technologies are not abstract goods. They are physical products that require complex, capital-intensive manufacturing ecosystems. Rebuilding these ecosystems means making things in America again—at scale, with precision, and with purpose. 

“We need to stop pretending that we can dominate the future while outsourcing the tools to build it. America can’t lead in AI or semiconductors if it doesn’t weld, machine, or fabricate the critical systems that power them.” 
— Jason Frank, AI Infrastructure Partners 

Trade must be subordinated to this strategic imperative. That means correcting decades of trade imbalance, decoupling from adversarial supply chains, and reasserting domestic production as the centerpiece of American economic power. 

From Dependency to Dominance 

It is no longer acceptable for the United States to rely on strategic competitors—or even fragile allies—for components essential to its sovereignty. We should not depend on our adversaries for: 

• Semiconductor tools and equipment 

• Precision power management chips 

• RF and analog components for defense systems 

• Industrial systems manufacturing 

• High-purity chemicals and critical minerals 

Every link in the chain that supports AI infrastructure should be mapped, and where possible, the essential nodes should be brought home. Where domestic capability doesn’t yet exist, we must create it—not outsource it. 

Trade Policy as a Tool of Industrial Power 

Trade should no longer be negotiated for the sake of access alone. It should be used as leverage to rebuild and protect the American industrial base. That includes: 

• Strategic tariffs on adversarial technologies and supply chains 

• Incentives for onshoring high-value manufacturing 

• Domestic content requirements for critical infrastructure 

• Penalties for companies that shift intellectual property or fabrication overseas 

This is not protectionism—it is realism. It is the recognition that national security, economic resilience, and technological leadership all flow from the same root: the ability to build. 

A New Era of American Industrial Sovereignty 

The world is entering a new industrial era. It will be led not by countries that merely consume or code—but by those who build. America has the talent, capital, and ingenuity to lead this resurgence. 

What we need now is the political will and investment focus to match. That means aligning trade policy with national purpose—not GDP abstractions. It means rejecting the false bargain of cheap imports for hollowed-out factories. And it means recognizing that manufacturing is strategy, not nostalgia. 

AI Infrastructure Partners is investing in companies that embody this belief—firms that are rebuilding U.S. capacity to produce, scale, and defend the physical infrastructure of tomorrow’s AI-driven world. 

Policy Alignment and Strategic Capital Formation 

To address the systemic risk outlined in the Select Committee’s report, the U.S. must take coordinated action across both public and private capital channels. 

This includes restricting outbound investment to PLA-linked or blacklisted firms, codifying investment controls in critical technology sectors, and dramatically scaling domestic industrial capacity at both the advanced and mature-node levels. 

But it also requires a cultural shift within the capital markets—away from short-term arbitrage and toward national strategy. In the words of the Committee: “Outbound U.S. capital investment in critical sectors has advanced the PRC’s strategic priorities while undercutting U.S. strategy toward the PRC” (Select Committee Report, 2024). 

The American investment ecosystem must now redefine its mission—to ensure that financial capital aligns with national resilience and democratic values. AI Infrastructure Partners stands as a model for this new doctrine. 

Conclusion 

The United States cannot defend democracy, power its economy, or wage 21st-century competition on a 20th-century capital strategy. We must build—not just the next big app—but the full stack of resilient, sovereign infrastructure that underlies the AI era. 

AI Infrastructure Partners is doing exactly that—investing not only in what's next, but in what lasts. 

Let others chase unicorns. We are rebuilding the backbone of American strength. 

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