Companies Getting Big Funding Could Prove Big Winners

New technologies require massive amounts of capital for research, development, and production. The rise of AI-related trades also means that many chipmakers need to get better at making more advanced semiconductors, and more quickly.

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  • Companies in the sector working on that challenge are eligible for funding from the Chips Act, which is designed to increase semiconductor production in the United States and improve competitiveness. It could also be a sign that some chipmakers could be more successful in the years ahead.

    The most recent beneficiary is Intel (INTC). The chipmaker will get up to $8.5 billion in funding from the Chips Act. That could help the company regain some of its lost luster in recent years in the chip space.

    Operationally, Intel has struggled over the last year. The company lost money, even as revenues rose by nearly 10%. Intel is operating under a miniscule profit margin of 3%.

    However, shares are up nearly 50% as well, as the chip players, profitable or not, have trended higher. Additional funding and improved offerings could help Intel swing to a profit.

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  • Action to take: Shares are still reasonably valued among chipmakers here, especially if Intel can take off. Even following a series of dividend cuts, shares still pay a 1.2% yield. Investors should wait for the current downtrend to end before buying shares.

    For traders, shares have been trending lower in recent weeks. The May $40 puts, last trading for about $1.95, could see a mid-double-digit return in the coming weeks on further downside.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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