KLA Corp., Applied Materials, Intel among expected beneficiaries of CHIPS Act, BofA says
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KLA Corp. (NASDAQ:KLAC), Applied Materials (NASDAQ:AMAT) and Intel (NASDAQ:INTC) are among several semiconductor companies that would likely benefit if the U.S. government passes stimulus for the industry, Bank of America said.
Analyst Vivek Arya noted that more stimulus and fab construction in the U.S. could benefit the aforementioned companies, as well as Lam Research (LRCX), ASML Holding (ASML), though those benefits would only come in 2024, as Phase 1 would focus on fab and clean room construction.
Other companies that could benefit include Micron Technology (MU), Texas Instruments (TXN), GlobalFoundries (GFS), Analog Devices (ADI), ON Semiconductor (ON), Wolfspeed (WOLF) and NXP Semiconductors (NXPI).
There could also be a research & development tax incentive for fabless semiconductor companies such as Nvidia (NVDA), Broadcom (AVGO), Marvell (MRVL), Advanced Micro Devices (NASDAQ:AMD) and Qualcomm (QCOM), depending on the final version of the legislation.
On Monday, it was reported that Nvidia (NVDA), Advanced Micro Devices (AMD) and Qualcomm (QCOM) were deciding whether to oppose the $52B CHIPS Act on grounds that the current version of the legislation does not do enough to support them and heavily favors manufacturers such as Intel (INTC).
Despite the potential for government stimulus, Arya noted there would be "limited long-term benefits" and likely just a one-off, as they don't "really change the long-run structure and competitive dynamics."
A draft version of the CHIPS Act would impose rules to ensure that companies using the subsidies did not build or expand plants in China or other countries deemed unfriendly, according to The Wall Street Journal.
If there are any Chinese-specific restrictions on the bill, Arya said that may actually "dilute the benefits," creating unintended geopolitical concerns and further exacerbate the shortage of chips that Chinese foundries specialize in, specifically trailing edge notes.
Seeking Alpha confirmed last week that Intel (INTC) has informed some of its customers that it will start raising prices on its chips as a result of rising cost pressures.