Macro
CHIPS Act allocates billions to boost U.S. semiconductor industry, with major firms and Micron Technology as key beneficiaries.
By Mackenzie Crow
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In 2022, the U.S. Congress passed the CHIPS Act, earmarking tens of billions in loans and grants to stimulate the construction of new semiconductor fabrication plants (fabs) within the United States. This legislative move aims to reassert the U.S. as a pivotal player in the global semiconductor industry. Key beneficiaries of this funding include industry giants such as Intel, Samsung, and TSMC, marking a significant step in the long journey towards enhancing the U.S.'s semiconductor production capabilities.
Despite the ongoing heavy investment by tech giants in semiconductor and artificial intelligence (AI) computing hardware, companies like Advanced Micro Devices Inc. (AMD) and Super Micro Computer Inc. have experienced notable stock price declines. AMD's stock fell by 8.1% following an updated revenue forecast, and Super Micro's shares dropped by 17% despite surpassing quarterly projections. This trend extended to other industry players, with Nvidia Corp., Arm Holdings Plc, and Dell Technologies Inc. also seeing declines. Peter Garnry of Saxo Bank highlighted that these adjustments are justified, pointing to the companies meeting fiscal year 2024 estimates but not exceeding them. The Philadelphia Stock Exchange Semiconductor Index's performance and the heightened expectations surrounding AI hardware stocks underscore the market's current volatility.
Micron Technology has emerged as a significant recipient of the CHIPS and Science Act's financial incentives, with the U.S. government allocating $6.1 billion in grants and up to $7.5 billion in loans. This support is intended for the construction of chip-fabrication facilities in New York and Idaho, representing the largest private investment in the history of both states. Citigroup analysts have set a bullish $150 price target for Micron shares, citing the DRAM recovery and the anticipated demand for memory chips in AI applications as key growth drivers.
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