Senate Still Tinkering on Chips Act. What It Means for Intel and Other Stocks.

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Semiconductor stocks rose Tuesday in anticipation of a Senate vote on a bill that would authorize more than $50 billion in subsidies and tax credits for U.S. chip makers.

Senate Majority Leader Chuck Schumer had scheduled a vote to consider the measure, known as the Chips for America Act, but it had not taken place as of 6 p.m. Tuesday.

The Chips Act is a pared-down version of earlier bills designed to strengthen the U.S. semiconductor industry and reduce dependence on Asian manufacturers amid a global shortage of chips that is expected to last through 2023.

The Chips Act authorizes about $52 billion in grants and loans for chip manufacturers, as well as a new, four-year 25% investment tax credit for chip making. The bill was spurred by the global shortage for semiconductors that has stunted production of a myriad of consumer products, from automobiles to smartphones to gaming consoles and more.

Final passage of the Chips Act could come as early as next week after the Senate begins deliberations, said Capital Alpha analyst Robert Kaminski.

Semiconductor companies have been torn over how to perceive the bill, given that it disproportionately benefits semi manufacturers, like

Intel

(ticker:

INTC

) over semi designers, such as

NVIDIA

(

NVDA

) and

Advanced Micro Devices

(

AMD

).

In January, Intel announced plans to invest more than $20 billion to build a semiconductor manufacturing plant in Ohio. The company hoped to break ground July 22, but indefinitely delayed the ceremony partially due to the uncertainty surrounding the chip-related legislation.

“Intel continues as our investment theme proxy for this legislation,” wrote 22V Research analysts Kim Wallace and Sandra Namoos on Tuesday.

Capital Alpha analyst Kaminski estimated that the actual amount of funding available for chipmakers will dwindle to about $38 billion from the headline figure of $52 billion when accounting for federal research programs and administrative overhead expenses.

Still, the possibility lifted semiconductor stocks across the board on Tuesday. Intel rose 3.9%, NVIDIA gained 5.5%, Advanced Micro Devices rose 5.5%, and Micron Technology increased 3.2%. The PHLX Semiconductor Index climbed 4.6%.

“Semis investors have been looking for CHIPS passage to be a catalyst for the stocks, but we have been cautioning that it will take months for the money to actually get out the door,” Kaminski wrote.

Write to Sabrina Escobar at sabrina.escobar@barrons.com