Chips for America Act passes first procedural hurdle in the Senate
Borislav/iStock via Getty Images

Semiconductor stocks were electrified on Tuesday ahead of 64-34 vote in the Senate over subsidizing domestic chip production. The bipartisan bill would provide around $52B to encourage manufacturers to build foundries and broadly invest in the sector in the U.S., which both sides of the aisle agree is a national security necessity. While the measure has cleared its first procedural hurdle, other details of the legislation are still being worked out.
What's at stake? The Chips for America Act is a slimmed-down version of a larger competitiveness package called the United States Innovation and Competition Act (USICA). It specifically authorizes grants and loans for chip-making, as well as 25% investment tax credits for semiconductor manufacturing. While lawmakers agree that the U.S. needs more domestic capacity - to counter supply chain issues in the aftermath of the pandemic - there is still disagreement on adding other provisions to the bill like scientific funding.
Some controversy has also been seen in the industry itself, with chip designers like Nvidia (NVDA), Qualcomm (QCOM) and AMD (AMD) saying it disproportionately benefits manufacturers like Intel (NASDAQ:INTC), Micron (MU) and Texas Instruments (TXN). Actual funding could subsequently slip to $38B (from $52B) when factoring in federal research programs and administrative overhead expenses, but investors are still welcoming any reshoring of the critical U.S. sector. According to Capital Alpha analyst Robert Kaminski, final passage of the Chips Act could come as early as next week.
Handouts or a necessity? There's an interesting discussion taking place as national security bumps heads with economic philosophy. While most Congressional lawmakers are calling it a defense imperative, some critics are classifying the bill as corporate welfare, citing billions of dollars in subsidies being granted to profitable domestic corporations. Market competition is also of concern if the bill only benefits a few companies or gives targeted funds to direct competitors.
Premarket movement: Nvidia (NVDA) +1.5%, AMD (AMD) +1.5%, Intel (INTC) +1.1%, Applied Materials (AMAT) +1%, Micron (MU) +0.8%, Broadcom (AVGO) +0.6%, Texas Instruments (TXN) +0.5%, Taiwan Semiconductor Manufacturing (TSM) +0.4%, Qualcomm (QCOM) +0.4%.