Experts See $280 Billion Bill Boosting ‘Incredible Demand’ for Chip Stocks

  • Senators voted to advance the CHIPS Act.
  • The bill is aimed at spurring domestic semiconductor production.
  • This is likely to prove a significant boon for chip stocks.
"chip stocks" - Experts See $280 Billion Bill Boosting ‘Incredible Demand’ for Chip Stocks

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U.S. chipmakers are about to see a significant growth catalyst. Yesterday, the Senate voted to move the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act forward. As Axios reported, the package is intended to “entice companies to expand chip manufacturing in the U.S., reducing the risk of the supply chain disruptions that hampered production of everything from cars to appliances and helping the U.S. compete overseas, particularly with China.” This thumbs up from Capitol Hill quickly sent chip stocks soaring.

The controversial bill has officially cleared its biggest hurdle, passing the required 60 votes to move forward. It still has to pass a vote in the House of Representatives. However, this Senate achievement should appease any investors who were nervous about the CHIPS Act passing. And some experts are highly bullish on chip stocks as a result, predicting significant growth ahead for the sector.

A New Boom for Chip Stocks

News of the bill’s advancement immediately sent chip stocks up yesterday. Nvidia (NASDAQ:NVDA), Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD) are likely to rally higher once the bill clears its final hurdle.

Zeno Mercer of market research firm and advisory ROBO Global sees explosive growth ahead for the chip sector. “The CHIPS-plus Act should pass the House easily,” he told InvestorPlace.

As for fab vs fabless semiconductor benefactors, the demand was and will be there regardless of bill passage. This does give NVDA, AMD and Intel advantages in terms of better control by de-risking supply-side and supply chain, while improving ROIC through better economic incentives. Downstream, players involved in cloud infrastructure / AI also benefit and pass down all the way to consumers in the form of better, more affordable products and services.

One example Mercer cites is Teradyne (NASDAQ:TER), a U.S. company that designs and manufactures automatic test equipment. Because its client list includes many chip makers who are about to benefit from the bill, he sees it as a winner among chip stocks. He carefully highlights the bigger picture, though, emphasizing the long-term demand for chip makers:

We’re going to see a gigantic medium-to-longer-term wave from the next generation of consumer hardware and software, like wearables and AR/VR, which require high-end chips, enterprise, and Cloud. The CHIPS-plus Act empowers that and provides services, pulling from networking, devops, security, and electric autonomous vehicles (EAVs), and of course, defense applications.

The Bottom Line

As Mercer sees it, these long-term growth levers for chips are what the bill is ultimately aiming to address. “We’re looking at an incredible demand increase still.”

While Mercer thinks that the CHIPS Act makes sense at a time when chip production is of paramount importance, he thinks investors need to take a macroeconomic perspective of what it means.

“The CHIPS-plus bill will bring tons of jobs and investment directly and indirectly,” he told InvestorPlace. “All this is now made possible because of the advancements in robotic automation, such as improved AI analysis and manufacturing robots that improve productivity-per-employee.”

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.


Article printed from InvestorPlace Media, https://investorplace.com/2022/07/experts-see-280-billion-bill-boosting-incredible-demand-for-chip-stocks/.

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