Trump’s Discontent with the Chips Act: Implications for Semiconductor Makers
In a recent address, former President Donald Trump made it crystal clear that he is not a fan of the Biden-era Chips Act, raising eyebrows in the semiconductor industry about the future dynamics of this crucial program. With the semiconductor market remaining a key battleground for innovation and manufacturing supremacy, let’s delve into what this means for key players like Intel and TSMC and what traders should be watching closely.
The Chips Act Under Fire
The Chips Act was designed to catalyze semiconductor manufacturing in the U.S. by allocating substantial government funding to build more factories, something that resonates strongly given the strategic importance of chips in the global economy. Trump’s critical remarks during his address have led to speculation regarding the ongoing viability of the act.
Trump’s antagonism toward the Chips Act seems particularly pointed, especially considering his recent praise for Taiwan Semiconductor Manufacturing Company (TSMC). TSMC has pledged a hefty $100 billion investment in U.S. production facilities, building on an already ambitious $65 billion that was planned. It’s crucial to note that this investment is separate from the Chips Act funding. This move could lead to further market shifts, particularly as it signals a focus away from traditional U.S. stalwarts like Intel Corp (INTC).
The Future of Intel
Wall Street’s sentiment for Intel has turned sour as Trump’s remarks signal that Intel might be “left on the side of the road” without support for new partnerships that could bolster its market standing. Stakeholders have harbored hopes of a deal that might buoy Intel’s prospects, particularly as interim Chairman Frank Yeary has engaged with the Trump administration regarding Intel’s future. However, optimism appears muted as the administration seems to be leaning toward TSMC instead.
Shares of Intel fell 2.4% immediately following these announcements, reflecting investor anxiety about the company’s competitive position. Many analysts caution against potential partnerships between Intel and TSMC, viewing them as detrimental rather than beneficial. Robert Maire from Semiconductor Advisors expressed his concerns clearly – a label of “side of the road” can potentially signal larger systemic issues within Intel’s market strategy.
Upcoming Innovations
Despite the bleak outlook for Intel, there remains a glimmer of hope stemming from the company’s advancements in its next-generation manufacturing process, known as 18a. Analysts such as Bernstein’s Stacy Rasgon assert that this process is yielding promising results and that the upcoming chip line, code-named Panther Lake, anticipated for production in late 2025, could revitalize Intel’s standing if managed correctly.
The Contest Over Funding
While it appears that the Chips Act might not be scrapped outright, the political landscape suggests that funding might dry up significantly. Senate Minority Leader Chuck Schumer has publicly opposed efforts to undermine these investments, emphasizing the jobs being created. However, Maire’s insight that promises made at the end of the Biden administration might be at risk suggests that significant existing contracts could face hurdles.
The funding awarded by the Chips Act to prominent firms like Samsung, Texas Instruments (TXN), and Micron Technology (MU) plays a pivotal role in the landscape of semiconductor manufacturing. It’s crucial for traders to monitor whether ongoing support for these initiatives remains intact or if the current administration opts to significantly alter the funding landscape.
Looking Ahead
For traders keen on semiconductor stocks, the coming weeks and months will be crucial. While the bipartisan support for semiconductor manufacturing might have some staying power, the impending reviews by Commerce Secretary Howard Lutnick raises questions about existing contracts. The potential for reworking deals might lead to increased uncertainties as the administration reviews famous rewards finalized under Biden.
Raymond James’s policy analysts believe that while a repeal of the Chips Act is unlikely, the landscape may shift surrounding the existing contracts. The focus will be less about revoking the legislation and more on how these existing agreements will evolve, especially in light of Trump’s critical remarks.
Final Thoughts
In a market characterized by volatility and rapid change, keeping an eye on both the broader geopolitical implications and specific stock movements is essential. For now, focus on companies closely tied to the Chips Act, like Intel and TSMC, and stay alert as developments unfold. This space is dynamic, and uncertainty will create opportunities for nimble traders ready to act on trends. Be prepared to seize any market movement as the semiconductor saga continues!
