Written by Brenda Nakalema

Senate Votes on Chips Act. What This Means for Intel and Other Stocks

Semiconductor stocks climbed on Tuesday in anticipation of the Senate vote on a bill that would authorize over $50 billion …

Semiconductor stocks climbed on Tuesday in anticipation of the Senate vote on a bill that would authorize over $50 billion in subsidies and tax credits for U.S chip makers.

The measure, now loosely referred to as the Chips for America Act, is a subset of a more comprehensive set of bills designed to strengthen the U.S semiconductor industry and reduce the country’s dependence on Chinese and Taiwanese manufacturers.

This new Chips Act authorizes roughly $52 billion in grants and loans for chip manufacturers and a new, four-year 25% investment tax credit for chip making. The bill was inspired by the global semiconductor shortage that stunted the production of many products; automobiles, smartphones, gaming consoles, and so much more. According to officials, the global shortage is expected to last through 2023.

A vote has been scheduled by Senate Majority leader Chuck Schumer to consider the bill during Tuesday’s session, following months of negotiations over a sweeping competition act stalled. According to Capital Alpha analyst Robert Kaminski, the Chips Act could be passed early next week after the Senate begins its deliberations.

Semiconductor companies have been conflicted about how to take the bill, especially because it seems to disproportionately benefit semi manufacturers such as Intel (ticker: INTC) over semi designers like NVIDIA (ticker: NVDA) and Advanced Micro Devices (ticker: AMD).

Early January saw intel announce its plans to invest over $20 billion to build a semiconductor manufacturing plant in Ohio. The company hoped it would begin the process by July 22 but delayed plans because of the uncertainty surrounding the bill.

“Intel continues on as our investment theme proxy for this legislation,” wrote 22V Research analysts Kim Wallance and Sandra Namoos.

Kaminski previously estimated that the actual amount of funding available for chip makers would dwindle to roughly $38 billion from the anticipated figure of $52 billion when accounting for federal research programs and administrative overhead expenses is done.

However, despite this news, semiconductor stock across the board performed well in Tuesday’s premarket trading. Intel gained 1%, while Nvidia climbed 1.3%, Advanced Micro Devices 1%, and Micron Technology (ticker: MU) 1.2%. The PHLX Semiconductor index grew 1.6%.

“Semis investors have been searching for CHIPS passage to be a catalyst for the stocks, but we have been cautioning that it will take months for the money to actually get out the door,” said Kaminski.