What happened
Shares of Advanced Micro Devices (NASDAQ: AMD) climbed 5.5% on Tuesday ahead of a key Senate vote that could help to fuel the growth of the U.S. semiconductor industry.
So what
Congress is expected to vote on a bill known as the Chips for America Act. The proposed legislation could authorize roughly $52 billion in subsidies and tax credits. The Chips Act is intended to spur investment in the manufacturing of semiconductors in the U.S.
The vote comes as chip shortages are slowing the production of a wide array of goods, from mobile phones to automobiles and nearly everything in between. Some lawmakers also see the bill as a way to reduce the country's reliance on international production hubs, such as China and Taiwan, at a time when geopolitical strife in Europe and other areas is threatening to upend long-standing supply agreements.
Now what
Yet, while it's understandable that investors would expect a bill designed to benefit the chip industry would be a boon for chipmakers, AMD's rivals may obtain the lion's share of the benefits. The Chips Act is primarily geared toward boosting the manufacturing of chips in the U.S., so it likely would benefit companies like Intel that design and build their own chips. Chip designers like AMD that outsource the production of their chips to third-party manufacturers would stand to receive fewer subsidies.
Investors can expect to hear AMD's view of the Chips Act's potential impact on the industry when it reports its second-quarter financial results on Aug. 2. Its management team is scheduled to conduct a conference call with analysts beginning at 5 p.m. ET that same day.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Intel. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.
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