Shares of Micron Technology (MU +2.55%) gained ground on Thursday, climbing as much as 1.1%. While this might not seem like much to celebrate, the gains came against the backdrop of a broader market downturn as the Nasdaq Composite lost 0.8% and the S&P 500 shed 0.6% (as of this writing). As of 1:41 p.m. ET, the stock was still up 0.5%.
The catalyst that sent the memory and storage chipmaker higher was word that the company would receive as much as $13 billion in loans and subsidies from the CHIPS Act.
NASDAQ: MU
Key Data Points
An influx of cash
The White House announced on Thursday that Micron would receive grants and loans under the CHIPS and Science Act, a program designed to revitalize the semiconductor industry in the U.S. Micron, a leading supplier of memory (DRAM) and storage (NAND) chips, will receive up to $6.1 billion in federal grants to subsidize the construction of two fabrication facilities -- one in Clay, New York, and the other in Boise, Idaho, where Micron is headquartered. In addition to the direct funding, the preliminary agreement also provides $7.5 billion in loans to support these projects.
In return for these funds, Micron has agreed to invest up to $125 billion between the two states over the next two decades to "build a leading-edge memory manufacturing ecosystem."
In addition to the funds from the CHIPS Act, Micron will benefit from the investment tax credit, which provides a credit of 25% for "qualified capital investments." The state of New York is also offering $5.5 billion in incentives over the life of the project.
Micron becomes the fourth chipmaker to receive funds under the program, which has also disbursed $8.5 billion in funds to Intel, $6.6 billion to Taiwan Semiconductor Manufacturing, and $6.4 billion to Samsung.
This represents a strategic opportunity for Micron, yet the stock is selling for less than 4x next year's sales. While that's a slight premium, compared to the multiple of 3x for the S&P 500, the broader opportunity makes Micron a buy.
