Intel (NASDAQ: INTC) stock is seeing significant gains in Wednesday’s trading. The semiconductor company’s share price was up 3.5% as of 2:15 p.m. ET and had been up as much as 3.8% earlier in the daily sessions.
Intel stock is gaining ground today as investors are becoming more confident that the company is on track to receive the $19.5 billion in federal funding it’s slated to receive through the CHIPS Act. Business and government leaders in four states are making a push for the dispersal of funds stemming from the legislation prior to Donald Trump taking office next year.
However, there are reasons to think that Intel will receive the capital injection that’s been outlined, even with the upcoming change in administration.
State leaders are calling for rapid dispersal of CHIPS Act funds
As a result of Trump’s victory in the presidential election, some investors and analysts have been worried that Intel won’t receive the $8.5 billion in direct funding and $11 billion in loans that it’s scheduled to receive through the CHIPS Act. Trump and some other Republicans have made comments critical of the legislation, and receiving funding through the Act is central to Intel’s plans to expand its semiconductor fabrication business.
Intel has been planning to expand its fabrication footprint in Ohio, Arizona, Oregon, and New Mexico, and new projects in these states would be a major economic windfall for local economies. Due to the significance the CHIPS Act funding holds for these projects coming to fruition, leaders in the four states sent a letter to the Biden administration yesterday requesting that the funding be distributed within the next 30 days.
The administration may move to disperse the funds to Intel within that window or before Biden leaves office, but investors shouldn’t panic if that doesn’t happen.
Bolstering Intel’s fab business has bipartisan support
Intel is slated to receive more funding through the CHIPS Act than any other company, and that’s hardly an accident. While many companies design their own chips, very few have the capacity to manufacture their designs. Fewer still have the capacity to handle fabrication for third-parties.
Intel is the third-largest chip fabrication company in the world, behind only Taiwan Semiconductor Manufacturing (TSMC) and Samsung. It’s by far the largest fab player in the U.S., and that’s becoming an increasingly important distinction.
Relations between the U.S. and China have continued to worsen, and concerns that the rising Asian superpower will move to exert greater control over Taiwan are central to the increasingly adversarial relationship. If China were to seize Taiwan, it could gain control of Taiwan Semiconductor Manufacturing — the leading global manufacturer of semiconductors. TSMC’s dominance when it comes to producing advanced artificial intelligence (AI) chips is particularly pronounced, and this creates significant economic and defense risks.
In response to this situation, the U.S. and other allied countries have been making moves to bolster domestic chip manufacturing capabilities. With this dynamic in mind, it’s unlikely that the change in administration will bring material changes to the funding Intel receives through the CHIPS Act.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has 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.
