Semiconductor, PC stocks rally after Biden touts importance of U.S. chip manufacturing

In his speech, Biden referenced Intel Corp.’s INTC, +4.38% planned “mega site” fab complex in Ohio, where Intel has pledged to invest more than $20 billion. Intel has also pledged $20 billion for sites in Arizona. Intel is also expanding capacity in the manufacture of lower-tech microchips with its $5.4 billion deal to buy Tower Semiconductor Ltd. TSEM, +0.73%, which not only has fabs in Migdal Haemek, Israel and Agrate, Italy, but in Newport Beach, Calif.; and San Antonio, Texas. Intel pledged up to $28 billion in capital spending for 2022 in October.

U.S. chip manufacturing capacity is especially important, not only because of an ongoing chip supply shortage but because of the industry’s high dependence on companies like Taiwan Semiconductor Manufacturing Co. TSM, +1.44% and South Korea’s Samsung Electronics Co. 005930, +1.67% Intel Chief Executive Pat Gelsinger was a guest of First Lady Jill Biden. 

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“Intel’s CEO, Pat Gelsinger, who is here tonight, told me they are ready to increase their investment from $20 billion to $100 billion,” Biden said in his speech.

“That would be one of the biggest investments in manufacturing in American history,” Biden told Congress. “And all they’re waiting for is for you to pass this bill.” 

On Intel’s last earnings call, Gelsinger said that if Congress passed the legislation, it would be “an accelerant for our investment plans” and “we’re going to build [the Ohio site ] out faster as a result and we think that’s good for our company.”

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The PHLX Semiconductor Index  SOX, +3.37% closed up 3.4% Wednesday, compared with near 2% gains in the S&P 500 index SPX, +1.86% and the tech-heavy Nasdaq Composite Index COMP, +1.62%, while Intel shares finished up 4.4%. The SOX chip index, however, is still in correction territory, down 10.7% from its record close set on Dec. 27, having briefly ventured into bear market territory at the end of January.

Other chip makers joined in the rally, such as Micron Technology Inc. MU, +8.16%, which like Intel, has its own fabs and does not have to depend on third-party fabs like TSMC and Samsung. For that reason, Micron also stands to benefit from subsidies, and shares led the sector higher surging 8.2%. Micron is scheduled to report earnings on March 29. Shares of U.S. based third-party fab GlobalFoundries Inc. GFS finished up 2.4%.

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Other chip makers outperforming the SOX included Advanced Micro Devices Inc.  AMD, +3.91%, Qualcomm Inc. QCOM, +3.83%, and Marvell Technology Inc. MRVL, +4.19%. Shares of Nvidia Corp. NVDA, +3.18%, the largest U.S. chip maker by market cap, and Broadcom Inc. AVGO, +2.75% lagged the index and closed down 3.2% and 2.8%, respectively.

PC makers, which stand to benefit from added capacity given the nearly two-year long chip shortage brought on by COVID-19, also rallied with Dell Technologies Inc. DELL, +7.46% closing up 7.5% and HP Inc. HPQ, +6.57% shares finishing 6.6% higher.

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