trump's 'magnificent america act' boosts us chipmaker tax credits to 35%
washington, Thursday, 3 July 2025.
the us senate just approved trump’s ‘magnificent america act’. it significantly raises tax credits for semiconductor companies building plants in the us. the investment tax credit jumps from 25% to 35%. this move aims to slash investment costs, encouraging chip manufacturing to return to america. intel, tsmc, and micron could benefit if they expand their us operations before 2026. this could be a game changer for us chip production.
Market reaction and stock performance
The news of the senate’s approval had an immediate, though varied, impact on the stock market [4]. Wednesday saw a collective rise in US chip stocks, fueled by the prospect of reduced investment costs [2]. Taiwan Semiconductor Manufacturing Company (TSMC) and Nvidia both experienced gains of approximately 3%, while Advanced Micro Devices (AMD) rose by about 2% and Broadcom saw an increase of nearly 2% [2]. Intel, however, bucked the trend, declining due to company-specific news [2]. Earlier in the day, the Philadelphia Semiconductor Index had fallen by 2.1% but managed to recover, closing down only 0.7% [4].
Tax credit details and implications
The ‘Magnificent America Act’ increases the investment tax credit from 25% to 35% for semiconductor manufacturers who start building new factories in the US before 2026 [1][4]. This incentive aims to counteract the higher costs associated with domestic manufacturing [3]. Daniel Newman, CEO of Futurum Group, noted that the threat of tariffs, combined with tax incentives, creates a compelling reason for chipmakers to move production to the US [2][3]. The increased tax credit has no upper limit and could surpass other forms of subsidies in value [4]. This benefits both companies that have received funding from the original chips act and those that have not [4].
Political context and industry outlook
This amendment to the ‘chips and science act’ reflects a continued effort to incentivize domestic semiconductor production [3][4]. While Trump had previously expressed a preference for tariffs over direct subsidies, the tax credit approach aligns with the broader goal of bringing chip manufacturing back to the US [2][3]. The house of representatives is expected to vote on the bill before 4 July [5]. Howard Lutnick, the US secretary of commerce, has indicated that the government is renegotiating existing subsidy programs with the industry, highlighting the ongoing commitment to reshaping the global semiconductor supply chain [3].
Strategic considerations for investors
For investors, the increased tax credit presents both opportunities and considerations [2]. Companies like Intel, Micron, and TSMC, which are already expanding their US operations, stand to gain from the improved project economics and accelerated timelines [1][3]. The potential for increased domestic production also offers a hedge against possible future tariffs on imported chips [2]. However, investors should monitor the house vote and any potential shifts in policy that could impact the long-term benefits of this legislation [5]. The trend of semiconductor companies seeking to establish or expand manufacturing in the U.S. appears poised for continued growth [3].