Top Line
On Wednesday, a wider drop in technology stocks was highlighted by declines from Nvidia, Intel, and Palantir during mid-day trading. Meanwhile, the Trump administration might pursue fairness for companies that receive federal grants through the Biden-era Chips Act.
Important facts
Commerce Secretary Howard Lutnick is looking into plans for the U.S. to acquire equity in chipmakers in exchange for funding granted under the Chips Act. It’s not completely clear how much the U.S. might invest in these companies.
Lutnick mentioned that the U.S. is monitoring Intel’s stock situation. Previously, White House press chief Caroline Leavitt indicated that the Trump administration was contemplating a 10% capital stake valued at about $10.4 billion.
The U.S. might also extend its requests for stock from other companies set to receive Chips Act funds, such as Micron, TSMC, and Samsung.
How did the market respond?
By around noon on Tuesday, the Nasdaq had dropped nearly 290 points (1.3%), with shares in Nvidia (2%), Intel (7%), Palantir (5%), AMD (2%), and Broadcom contributing to a wider tech sell-off. Other notable declines included Micron (5%), Tesla (3%), Amazon (2.1%), Apple (1.6%), and Microsoft (0.8%). In Asia, shares of semiconductor company TSMC fell by over 2%.
Is the U.S. gaining corporate interests?
Historically, the U.S. hasn’t often secured corporate equity, particularly since the 2008 financial crisis, which involved companies like General Motors and AIG. However, it has done so in times of economic difficulty, like Chrysler in the 1970s and various defense industries during WWII. Some economists argue that government equity could put taxpayers at risk, while others suggest it may help boost the industry.
What did Trump say about the Chips Act?
President Donald Trump has been highly critical of the Biden-era Chips Act, going so far as to threaten its cancellation. During his address to Congress in March, he described the Chips Act as “terrifying” and remarked, “We give hundreds of millions of dollars, and that doesn’t mean anything. They take our money and don’t spend it.”
Important Quotes
Lutnick shared with CNBC, “The Biden administration literally provided Intel for free and TSMC money for free. All these companies are getting money for free.”
Tangent
Earlier on Tuesday, Japan’s SoftBank announced it had decided to purchase $2 billion worth of Intel shares at a price of $23 per share.
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The U.S. is looking at equity stakes in chipmakers for Chips Act funding.
