Semiconductor stocks have been in focus ever since President Joe Bidensigned the bipartisan CHIPS and Science Actinto law on Aug. 9. ThePHLX Semiconductorindex is up around 5% since then. Of course, not all chip companies will benefit equally.
Before we get to which semiconductor stocks are likely to benefit most, it’s important to understand what the legislation aims to do.According to the White House:
The CHIPS and Science Act will boost American semiconductor research, development, and production, ensuring U.S. leadership in the technology that forms the foundation of everything from automobiles to household appliances to defense systems. America invented the semiconductor, but today produces about 10 percent of the world’s supply—and none of the most advanced chips…
The CHIPS and Science Act will unlock hundreds of billions more in private sector semiconductor investment across the country, including production essential to national defense and critical sectors.
In terms of actual numbers, the CHIPS and Science Act allocates $52.7 billion for semiconductor research, development, manufacturing and workforce development. That’s a lot of dough. So, let’s take a look at the semiconductor stocks likely to get a longer-term boost from the legislation.
Intel (INTC)
Intel(NASDAQ:INTC) is not my favorite semiconductor stock, especially when you compare it to high-growth names like Advanced Micro Devices(NASDAQ:AMD), whichI like much better. But, in this case, we’re looking at semiconductor stocks that will benefit the most from the new CHIPS Act — and Intel is certainly on that list.
A Bank of America analyst estimates that Intel couldreceive $10 billion to $15 billionfrom the CHIPS Act over the next five years. While the analyst noted that it won’t be a “silver bullet” for Intel, the large amount of funds will certainly be a positive for the company. With any luck, it will help Intel develop more advanced chips, which it’s currently lacking.
Analysts expect an 11.3% decline in revenue this year and a whopping 37.5% decline in earnings. However, in 2023, estimates call for revenue and earnings growth of roughly 3% and 1%, respectively. That’s hardly impressive, but keep in mind that Intel is a mature company. Its forward price-to-earnings ratio of 14.5 is well below that of AMD.
INTC stock is down 32% in the past 12 months. If shares have hit bottom, they could prove to be a steal for investors at these levels. Plus, there is the semiconductor stock’s 4%-plus dividend yield to consider.
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