This is a MASSIVE change in the VC/PE industry which has concentrated on various flavors of SaaS for the past decade+.
An entire ecosystem of research grants, commercialization grants, and private sector deal flow has now restarted in the sectors above that hasn't been seen in the past decade.
But I believe in market economy, and to me it looks like VC/PE didn't invest into hardware much because didn't believe in positive ROI in current condition.
Not exactly.
It was because of the upfront cost and lack of deal flow.
Before the various IRA and CHIPS provisions passed, you might get $200k at most from grants to commercialize research in the Energy or Hardware space. The rest would be fronted from the private sector so you're looking at an additional $800k-1M of private money at the pre-seed/seed stage. On top of that, deal flow was weak, so it's harder to fund later series or get good exits during an M&A event.
This is a very high upfront cost so obviously SaaS made sense due to much higher margins.
After IRA and CHIPS, you could expect to see an additional $300-500k in grants, which means my upfront cost in funding is lower.
Furthermore, the government is providing tax credits and grants to private sector players to minimize the amount of upfront money they need to spend (say) building a Battery Recycling plant or a Chip Packaging factory.
This means there is now much more money sloshing in these segments as a significant portion of my upfront risk has been subsidized by the US government. That money can now be deployed in either funding research projects commercializing into startups, re-investing in existing players to help their own M&A strategy, and funding additional research in the spaces above.
Plenty of peer funds did the same thing.
Even if Trump wins in November, most of the provisions in the acts I mentioned will be retained, especially given that a Thiel and A16Z acolyte is Veep and an early MS alum is cabinet track.