President-elect Trump has a lot of ideas, and potential policy changes related to foreign trade and manufacturing could be a boon for one particular chip company.
Now that the election results are in and Donald Trump has been named president-elect, it’s time to begin thinking about what a new administration in Washington, D.C., could look like. Considering Trump was already president between 2016 and 2020, investors at least have some idea of what to expect in terms of policy change.
Below, I’m going to break down why I see Intel (INTC 0.48%) emerging as a major winner under the upcoming Trump administration.
Intel and the CHIPS Act
One of the biggest initiatives under the Biden-Harris administration was the CHIPS and Science Act. At its core, the act achieves two goals: increasing investment in domestic tech research and bolstering semiconductor manufacturing capabilities in the U.S. in an effort to more heavily compete with players overseas.
Since the CHIPS Act was signed into law in 2022, Intel has been awarded a number of government contracts worth up to billions of dollars. Now that Trump is coming to the White House in January, I think Intel’s relationship with the federal government is about the get much stronger.
Image source: Getty Images.
How a Trump White House could benefit Intel
Throughout his campaign, president-elect Trump touted one economic concept over and over again: tariffs. Trump’s goal with tariffs isn’t just to generate more domestic tax revenue. Instead, his administration is going to try to use tariffs as a form of leverage as it pertains to foreign trade policy.
Here’s how tariffs on overseas imports could wind up being a major catalyst for Intel:
1. Government contracts: Considering Trump is likely going to put a preference on American manufacturing and businesses over competitors from abroad, I would not be surprised to see Intel receive further contracts under the CHIPS Act. Moreover, putting tariffs on semiconductors made overseas bodes well for Intel as the company has a unique opportunity to place more competitive pricing on its domestically made products. In turn, chip demand could begin transitioning from more overseas reliance in favor of U.S. manufacturers such as Intel.
2. Artificial Intelligence (AI) and the military: One of the most under-the-radar opportunities in the AI landscape relates to how military agencies leverage the technology. AI is a multibillion-dollar opportunity for the defense sector, and I think Intel has a chance to play an important role here.
It’s no secret that security is an increasingly important issue in supply chain logistics, especially when important pieces of technology are sourced outside of the U.S. If the incoming Trump administration imposes more stringent protocols related to defense technology, Intel could serve as a vital player for secure, U.S.-sourced infrastructure.
Is Intel stock a buy?
To be frank, Intel has had a rough go throughout 2024. The company is falling behind the competition — namely Taiwan Semiconductor Manufacturing — and a less-than-stellar review from Broadcom regarding Intel’s Foundry technology doesn’t exactly make an awe-inspiring opportunity. Oh, and then there’s the fact that Intel was just replaced in the Dow Jones Industrial Average by, of all companies, Nvidia.
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With shares down almost 50% year to date, at the time of this writing, Intel stock and its business as a whole look like they are in free fall.
However, I’m cautiously optimistic that Intel could be a lucrative turnaround opportunity given its already close alliance with the federal government and Trump’s vision to prioritize domestic manufacturing.
For now, I think the prudent strategy is to sit on the sidelines and wait until Trump is sworn into office in January. Once that happens, investors will have a clearer idea of what his cabinet is going to look like and how his policy agenda is progressing. In turn, investors should be able to better determine if there’s any new upside for Intel.
Adam Spatacco has positions in Nvidia. The Motley Fool has positions in and recommends Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
