The CHIPS Act

The Real Winner Of the CHIPS Act May Not Be Who You Think

The CHIPS Act is meant to fast-track the production of semiconductor chips in the United States, and transition the current production away from China and Taiwan.  The time has come, the U.S. means business now!

This administration is all about U.S. Sovereignty and possesses the ‘succeed at any cost’ mentality to once again, become a manufacturing powerhouse.  Ah, Ok maybe I have this Administration mixed up with previous ones.  But, ‘here’s to holding out hope’ that they do in-fact have the desire to see a regeneration of manufacturing in the USA.  Hopefully, we can all agree; having China sell us all their CRAP, makes us more dependent on them.

The CHIPS Act is a Bi-partisan Stimulus Program.

The CHIPS Act, which by the way, has both Democrats and Republicans in agreement, may still not be able to achieve its intended outcome.  Not because their intent is malicious, it’s just that The Federal Government lacks the ability to deploy capital efficiently.  Why?  The P word…  You guessed it- Politics.  Unfortunately inside the beltway, politics trumps all else.

The CHIPS Act or less commonly referred to as, The Creating Helpful Initiatives to Produce Semiconductors for America Act.  A mouthful of a name!  I love how the Federal Government creates a corporate welfare program then gives it a flowery name as if to try to somehow, fool us.

Oh, I guess you now know how I feel about the CHIPS Act.  Was it the ‘Corporate Welfare’, ‘lack of ability to deploy capital’, or the ‘trying to fool us’, statement that gave it away?  Probably all three.

Instead of giving money away, how about getting out of the way, and let markets be markets and let winners be winners and losers go out of business.  That’s it, just be on the sidelines to ensure a fair and equitable market and let the rest happen as it should.

The Chips Act will be a failure

It will fail, because in the eyes of Micron Technologies, Intel will get the lions share of the welfare.  Or, Intel Corporation decided not to build its Ohio plant because their stimulus money wasn’t received quick enough.  See, there are always circumstances that impede success when government and the private sector elect to work together.

Some Company will be on the losing end, while others will be on the winning end, and the winners may not even realized they won.  It’s how Corporate Welfare or welfare of any kind works, they only desire one thing… MORE.

4 U.S. Companies set to benefit from the CHIPS Act

Intel Corporation

Headquartered in Santa Clara, California, Intel Corporation has a market capitalization of $70 Billion and over 121,000 employees spread across the globe.

Intel supplies microprocessor chips to Dell, Acer, HP, and Lenovo, and is the worlds largest semiconductor chip maker by revenue.

Serving in his second stint at Intel Corporation; CEO Pat Gelsinger is an Icon in the semiconductor industry.  A graduate of Stanford in the mid 80’s with a Masters Degree in Electrical Engineering, Pat went on to invent the 486 micro processor which rendered the 386 processor obsolete.

Texas Instruments

Texas Instruments is based in Dallas, Texas and generated over $18 billion in sales in 2021.  Founded in 1930, Texas Instruments has grown its business into a chip manufacturing leviathan.  Many of it’s female employees give the the company high marks in things like:

Maternity and Adoptive Leave- 4.2 Star out of 5

Paid Time Off- 4.2 Stars out of 5

Employer Responsiveness –4.0 Stars out of 5

Source:  Inhersite.com

Micron Technology

Located in the beautiful city of Boise, Idaho, Micron Technology repeatedly gets high marks from its employees.

Here are some 2022 Employee responses when asked about the work culture at Micron.

Micron Technology

Source: Greatplacetowork.com

Micron’s 2021 Revenue was an enviable $27.7 Billion, which afforded it to reward shareholders with its ‘first of many’ dividends in September of 2021.  Micron has that ‘coveted’ low PE ratio, of 6.93 (TTM) rivaling few in the technology sector.

Nvidia Corporation

The reins of this company have never left the hands of its co-founder Jensen Huang.  He runs a very efficient operation and still manages to keep his employees engaged.  Nvidia Corporation ranks #1 as the best places to work in 2022 according to Glass Door.

His co-founders; Curtis Priem and Christopher Malachowsky either left the company or are semi-retired.  Somehow though, even after after amassing a fortune, Huang still has the desire to guide the Nvidia Corporation into its ‘golden years’.

Nvidia became a household name in the Gaming Card industry, when its RIVA 128 Gaming Card went mainstream in 1997.

Today Nvidia is still a leader in Gaming Cards with its GeForce RTX models leading the pack.  And, with the advent of ‘Proof of Work’ Cryptocurrency mining, the demand for newer, faster, more efficient chips has never been greater.

With the Cryptocurrency Revolution a mere 13 years old, and it’s ever increasing demand (even in a down market) Nvidia Corporation will remain relevant for many, many, years to come.

So who will be the Winners and the Losers of the CHIPS Act?

Winners of the CHIPS Act:

The Semiconductor companies-  Depending on how the Semiconductor companies use this money, it’s still un-earned capital.  They can hold it and draw interest off this capital, until forced to deploy it.  They could hold it in the bank and get paid interest with little to no risk.

The Shareholders of the Semiconductor companies–  This will likely have a positive market effect on share price, and those holding these companies will likely be the beneficiaries.  However this bump may turn out to be short-lived.

Swing traders taking out long positions-  Traders are waiting with bated breath for the House and Senate to come to an agreement.  I’m willing to bet there are plenty of them who have ‘long positions’ on some of these stocks in anticipation of that aforementioned share price bump.

Losers of the CHIPS Act:

Gen Z and Beyond– $52 Billion or even perhaps more, had to be paid back at some point.  $52 Billion may seem like very little when you have 144 Million taxpayers, but it adds up.  As interest rates rise, so too does the cost of servicing our National Debt.

If the trajectory of our spending progresses and we continue to be a ‘Net Importer’ of goods and services without offsetting it with Tax Revenue, our kids and grandkids will be a whole lot WORSE OFF than we were.

What are your thoughts on the winners and losers of the CHIPS Act?

Disclaimer Alert:  As always, I am not a financial adviser, and this is not intended to be considered financial advice, please do your own diligence when considering buying or selling shares in a publicly traded company.

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