Intel (NASDAQ: INTC) shares see significant gains in Wednesday’s trading. The semiconductor company’s stock price was up 3.5% as of 2:15 PM ET and had risen as much as 3.8% earlier in the daily sessions.
Intel shares are gaining ground today as investors grow increasingly confident that the company is on track to receive the $19.5 billion in federal funding it will receive through the CHIPS Act. Business and government leaders in four states are committed to distributing funds resulting from legislation ahead of Donald Trump taking office next year.
However, there are reasons to believe that Intel will receive the capital injection outlined even with the upcoming change of government.
State leaders are calling for rapid distribution of CHIPS Act funds
As a result of Trump’s victory in the presidential election, some investors and analysts are concerned that Intel will not receive the $8.5 billion in direct financing and $11 billion in loans it will receive under the CHIPS Act. Trump and some other Republicans have made critical comments about the legislation, and receiving funding through the law is central to Intel’s plans to expand its semiconductor manufacturing business.
Intel plans to expand its manufacturing operations in Ohio, Arizona, Oregon and New Mexico, and new projects in these states would be a major economic windfall for local economies. Because of the importance that CHIPS Act funding has in making these projects a reality, leaders in the four states sent a letter to the Biden administration yesterday asking that the funding be distributed within the next 30 days.
The administration could decide to distribute the money to Intel within that period or before Biden leaves office, but investors shouldn’t panic if that doesn’t happen.
Strengthening Intel’s great business has bipartisan support
Intel is slated to receive more funding through the CHIPS Act than any other company, and that’s certainly no coincidence. While many companies design their own chips, very few have the capacity to manufacture their designs. Fewer companies still have the capacity to perform manufacturing for third parties.
Intel is the third largest chip manufacturer in the world, trailing only behind Taiwanese semiconductor manufacturing (TSMC) and Samsung. It is by far the largest fab player in the US, and that is an increasingly important distinction.
Relations between the US and China have continued to deteriorate, and concerns that the rising Asian superpower will exert greater control over Taiwan are at the heart of the increasingly hostile relationship. If China were to capture Taiwan, it could gain control of Taiwan Semiconductor Manufacturing – the largest global semiconductor manufacturer. TSMC’s dominance in producing advanced artificial intelligence (AI) chips is particularly pronounced, and this poses significant economic and defense risks.
In response to this situation, the US and other allied countries have taken steps to strengthen domestic chip manufacturing capabilities. With these dynamics in mind, the change in administration is unlikely to result in material changes to the funding Intel receives through the CHIPS Act.
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Keith Noonan has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Intel and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: Short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
