Semiconductor foundry GlobalFoundries (NASDAQ:GFS) popped sharply higher on Wednesday, gaining about 10% before paring back some of the enthusiasm. Recent comments by former President Donald Trump catapulted the swing up. A potential pivot to an isolationist stance may benefit GFS stock as domestic chip production rises.
Based in Malta, New York, GlobalFoundries, according to its profile, “manufactures various semiconductor devices, including microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, and power management units.” With a potential shift in U.S. semiconductor policy to bolster domestic businesses, GFS stock could march higher as the underlying company enjoys greater market share.
In a recent Bloomberg Businessweek interview, Trump stated that Taiwan “did take about 100% of our chip business.” As a result, the island nation — which China claims as its own territory — should “pay us for defense.” Such a statement has strong geopolitical implications, with China’s position on Taiwan representing a source of significant international tensions.
Just as importantly, Bloomberg Businessweek noted that Taiwan manufactures over 90% of advanced chips, citing data from the Semiconductor Industry Association.
Domestic-Focused Policies Could Boost GFS Stock
While concerns related to the diversification of the global semiconductor supply chains have been previously broadcasted, the issue really came to a head during the disruptions and shortages seen during the Covid-19 crisis. It’s likely, then, that a conservative administration focused on bolstering domestic chip production would benefit GFS stock.
To be fair, the Biden administration has also launched initiatives to lift the U.S. semiconductor industry. According to MarketWatch, GlobalFoundries, along with Intel (NASDAQ:INTC), received awards as part of the Chips Act. These awards are part of a program that the current administration initiated to bolster domestic manufacturing operations.
However, GFS stock as an investment hasn’t been particularly impressive. Shares have endured choppy trading in the past five years, gaining roughly 20%. Further, analysts aren’t optimistic about the current fiscal year outlook. On average, they’re looking for revenue to reach $6.72 billion. If so, that would imply a 9.1% decline from last year’s print of $7.39 billion.
Even the high-side estimate of $7.17 billion is conspicuously off the pace. Still, a renewed focus on domestic chip output could invigorate GFS stock over the long run.
On the date of publication, Josh Enomoto 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.
On the date of publication, the responsible editor held a LONG position in INTC.
