On Wednesday, Intel (NASDAQ: INTC) shares surged as tech stocks rallied following Donald Trump’s election victory on Tuesday. This increase reflected investor optimism for tax cuts and relaxed regulations that could foster business growth.
Intel Faces Uncertainty Amid Political Shift
Intel’s future is closely tied to the next administration’s direction, especially regarding the CHIPS Act. The company has struggled in recent years and announced significant restructuring plans in August. Although Trump has criticized the CHIPS Act — referring to it as a bad deal during a conversation with podcaster Joe Rogan — it remains uncertain how he will handle commitments related to it as he takes office.
Recently, House Speaker Mike Johnson suggested that a Trump presidency could lead to the repeal of the CHIPS Act, though he later took back that assertion. Such mixed messages leave the semiconductor industry’s future ambiguous.
The CHIPS Act Explained
Enacted to bolster the American semiconductor sector, the CHIPS and Science Act designates $52.7 billion for semiconductor activities, including $39 billion in manufacturing incentives. The goal is to strengthen the U.S. semiconductor industry, which faces challenges due to tensions in Taiwan, a global manufacturing hub.
Intel, known for both designing and producing chips, could be the primary beneficiary of this act despite recent difficulties. In March, Intel and the Biden administration reached a non-binding agreement that could provide Intel with $8.5 billion in grants for new foundries and up to $11 billion in federal loans along with tax benefits.
This financial support plays a crucial role in Intel’s plans to invest over $100 billion in U.S. plants over the next five years.
Image source: Getty Images.
CHIPS Act’s Significance for Intel
In 2021, Intel launched Intel Foundry Services, aiming to produce chips for other semiconductor companies. So far, this initiative has generated significant losses as Intel builds its customer base. CEO Pat Gelsinger has ambitious plans to make the foundry business the second-largest globally by 2030, targeting a 30% adjusted operating margin.
The CHIPS Act is pivotal to this strategy, and although the $19.5 billion award was announced before Intel outlined its goals, Gelsinger has recently expressed frustration with slow financial disbursements. Additionally, Intel received $3 billion for military chips under a Secure Enclave grant.
Speculation on the CHIPS Act’s Future
Discussion surrounding the CHIPS Act under a Trump administration remains speculative. One possibility is that the Biden administration might allocate all funding before Trump takes office, though that remains uncertain.
Speaker Johnson highlighted potential for improvements to the legislation by cutting regulatory costs. Given Trump’s history of altering Obama-era policies, if he retains the CHIPS Act, it is likely he will redesign it to suit his administration’s agenda.
Mergers and Acquisitions Implications
Another area where the Trump administration could impact Intel is through mergers and acquisitions. Given Intel’s ongoing struggles and lowered valuation, a buyout is plausible. Reports indicate that the Commerce Department is considering Intel’s strategic importance in the supply chain, leading to discussions of a merger with another chip company.
Additionally, Qualcomm has expressed interest in acquiring Intel, and a Trump administration is anticipated to support mergers more than the current government.
Intel’s Path Forward
It remains unclear how the Trump administration will affect Intel. However, the company’s reliance on the CHIPS Act and possible acquisition discussions suggest that federal policy will significantly influence its stock performance. Initial stock price increases indicate investor optimism regarding Trump’s victory and hint at future opportunities for Intel.
Your Opportunity: Seize Potential Growth
Have you ever felt you missed a chance to invest in top-performing companies? Don’t miss out this time.
Our analysts occasionally identify stocks ripe for growth, offering a “Double Down” recommendation. If you think you missed the boat on investing, now could be the prime moment to buy before it’s too late. Here’s how some of our past recommendations fared:
- Amazon: A $1,000 investment in 2010 would be worth $23,446 today!*
- Apple: A $1,000 investment in 2008 would have grown to $42,982!*
- Netflix: A $1,000 investment in 2004 would be worth an astounding $428,758!*
Currently, we are issuing “Double Down” alerts for three incredible companies, and opportunities like this seldom come around.
Explore 3 “Double Down” stocks »
*Stock Advisor returns as of November 4, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Qualcomm. The Motley Fool recommends shorting November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
The views expressed here are those of the author and do not reflect those of Nasdaq, Inc.
