Top Line
Major semiconductor stocks in Asia and the US experienced declines on Wednesday during pre-market trading. This followed news that the Trump administration might look to acquire equity in companies receiving federal grants under the Biden-era Chips Act.
Important facts
Commerce Secretary Howard Lutnick is exploring the possibility of acquiring stock interests in chip manufacturers in exchange for the U.S. government’s grants, according to reports.
In a CNBC interview, Lutnick specifically mentioned Intel, stating, “We should gain fair interests for the money…it was already committed under the Biden administration.”
Though Lutnick didn’t go into detail, White House spokesperson Karoline Leavitt indicated that a deal with Intel might allow the government to acquire a 10% stake in the company.
It’s also noted that Lutnick could extend similar arrangements to other firms slated to receive grants under the Chips Act, such as Micron, TSMC, and Samsung.
Furthermore, many of the grants designated for these businesses have not yet been disbursed.
How did the market respond?
On Wednesday morning, Intel’s stock dropped over 1%, reaching $25.02, following a nearly 7% surge on Tuesday. Meanwhile, AMD shares, which fell more than 5.4% the previous day, saw a slight increase of 1.4%. Micron’s shares decreased by 5.16%. In the Asian market, TSMC’s stock fell by 4.2% to $37.51, while Korean firm SK Hynix witnessed a 2.9% drop to $182.74.
What about Nvidia’s stocks?
Nvidia’s shares climbed slightly to $175.85 in early trading on Wednesday, which is a 0.1% increase. It’s worth noting that unlike Intel and AMD, Nvidia doesn’t manufacture its own chips, relying instead on companies like TSMC and Samsung; therefore, it does not partake in the Chips Act grants.
What did Trump say about the Chips Act?
Former President Donald Trump has been vocally critical of the Biden-era Chips Act, suggesting he may scrap it altogether. During a speech to Congress in March, he described the Chips Act as “terrifying, scary,” and criticized the substantial funding without tangible outcomes.
Important Quotes
Lutnick remarked on CNBC, “The Biden administration literally offered Intel for free and TSMC for free. All these companies get money for free.” To which Trump responded, “Hey, I want money fair.”
Tangent
Earlier that day, Japan’s SoftBank announced it would purchase $2 billion worth of Intel shares at $23 per share.
