What happened
Thursday is turning out to be a great day to invest in semiconductor stocks.
As of 2 p.m. ET, shares of Advanced Micro Devices (AMD 1.33%) are up 5.3%, and Intel (INTC 1.77%) is gaining 6.1%. Meanwhile, Navitas Semiconductor Corporation (NVTS 0.24%), a maker of gallium nitride (GaN) power integrated circuits, is putting both of those larger companies to shame with its stock price gains -- up 12.2%.
Image source: Getty Images.
So what
What's driving the semiconductor sector higher today? Several things, actually.
Most broadly beneficial to chips stocks today are probably the comments from Intel CEO Pat Gelsinger, reported in the Silicon Valley Business Journal, who argues that in a technological age, semiconductors have become "the new oil," and encourages the U.S. government to subsidize efforts "to produce more" of them here in the U.S., so as to not be vulnerable to supply "disruptions" in China and elsewhere in Asia.
Nor is Gelsinger the only CEO making this argument. As Nikkei Asia reports today, multiple "top semiconductor executives" including both Micron Technology's Sanjay Mehrotra and Lam Research's Tim Archer are urging the U.S. government to allocate subsidies of as much as $52 billion "for the American chipmaking." As Mehrotra pointed out, China is already spending more than $100 billion to support its semiconductor industry, so the U.S. spending $52 billion would only be half that level of support.
Says Mehrotra, it's "extremely important" that the U.S. pass "the so-called CHIPS Act to support semiconductor research and manufacturing" and "catch up" in semiconductor manufacturing capability -- and as Nikkei Asia observes, this subsidy law does in fact have bipartisan support in the U.S., meaning it is likely to pass, which could benefit each of AMD, Navitas, and Intel.
Now what
Speaking of Intel, though, there's a second big development here that investors should be aware of. As Reuters reported yesterday, Intel rival Nvidia (NVDA 3.71%) has confirmed that it is "very interested in exploring" the possibility of using Intel's foundries to produce Nvidia chips -- and for its part, Intel says it is "thrilled for their interest."
The idea of Intel producing chips for other chip companies seemed pretty controversial last year, when Intel was trying to buy contract chip manufacturer GlobalFoundries. Regulators reportedly weren't keen on the idea of Intel's competitors becoming dependent upon Intel for their ability to produce chips. In the current environment of a global semiconductor shortage, however, the situation has become more all-hands-on-deck, with semiconductor companies apparently more willing to cooperate with one another to crank out more supply.
If the net effect of such alliances is to also reduce dependence upon Asia for chip manufacturing, however, and to bring more manufacturing capacity home to America, then all the better.
