Why Are Chip Stocks in Focus Today?

  • A number of chip stocks are moving today after the U.S. Department of Commerce released information about the implementation of the CHIPS Act.
  • Under the new rules, $28 billion will be spent to subsidize and incentivize U.S. chip production.
  • Intel (INTC) stands to become a key beneficiary of the law.
In Ultra Modern Electronic Manufacturing Factory Design Engineer in Sterile Coverall Holds Microchip with Gloves and Examines it.
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Today, a number of chip stocks are moving slightly in early trading. This is likely because the U.S. Department of Commerce just disclosed information about how $50 billion allocated by Congress to the semiconductor sector via the CHIPS Act will be spent.

Specifically, about $28 billion of the funds will be used to incentivize and subsidize chip manufacturing in the United States. The department will spend the funds several ways, including through “grants or cooperative agreements,” subsidized loans and loan guarantees. Further, the department will allocate another $11 billion to R&D.

Qualcomm (NASDAQ:QCOM) and Micron (NASDAQ:MU) are just two of the prominent chips stocks moving this morning. As of this writing, both QCOM and MU are down about 1%. However, they were trending in the green earlier today.

Chip Stocks: Criticism of the CHIPS Act

Chip stocks maybe moving today, but not everyone is happy about the CHIPS Act. For example, the China Institutes of Contemporary International Relations (CICIR) alleges that the legislation will prevent American and Chinese academics from collaborating. The organization calls itself “a longstanding, extensive and multifunctional research and consultation complex focusing on international strategic and security studies.”

In a sign that the U.S. may be looking to stunt the growth of the Chinese tech sector, the government also recently decided to restrict the sale of chips to Russia and China via a new requirement. More specifically, the U.S. government told chipmaker Nvidia (NASDAQ:NVDA) “about a new license requirement for future exports to China, including Hong Kong, to reduce the risk that the products may be used by the Chinese military.”

Meanwhile, Intel (NASDAQ:INTC) may be a key beneficiary of the CHIPS Act. The company recently announced a partnership that will be positive for INTC stock, according to Needham analyst Quinn Bolton. The chip maker just signed a $30 billion deal with Brookfield (NYSE:BAM) to shore up its dividend and — by lowering its capital expenditures by $15 billion — boost its free cash flow.

On the date of publication, Larry Ramer did not hold (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.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.


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