Investing.com-- Shares of Micron Technology Inc (NASDAQ:MU) are rising premarket on Thursday after Bloomberg reported the memory chip maker is set to receive over $6 billion in U.S. government grants by as soon as next week under the 2022 CHIPS and Science Act.
The grants are not finalized yet, but will potentially see Micron build more domestic factories, as part of a broader government effort to bring semiconductor production back on to U.S. soil, the Bloomberg report said.
Micron shares have gained more than 1% premarket following the report. They had slumped 4.5% during the session on Wednesday.
The report comes just days after Micron’s bigger rival- South Korean conglomerate Samsung Electronics Co Ltd (KS:005930)- was awarded $6.4 billion in grants to increase its chip production in central Texas.
Earlier, TSMC (2330) (TSM)- the world’s largest contract chipmaker, had received $11.6 billion in U.S. grants and low-cost loans to expand its plans for a factory in Arizona.
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act was signed into law in August 2022, and authorized about $280 billion in new funding to boost domestic efforts in developing and making semiconductors. It was also aimed at countering China and reducing the technology supply chain’s reliance on the country.
But the act has taken more precedence over the past year, especially as a boom in artificial intelligence sparked increased global demand for high-speed semiconductors. The U.S. has also taken more efforts to gain an edge over China in AI development, having recently banned the export of all U.S.-linked AI technology to the country.
Micron and Samsung manufacture high-bandwith memory (HBM) chips which are crucial towards meeting the large processing needs of AI programs. Both companies have forecast stronger earnings on the back of AI-fueled demand.
Hype over AI had put Micron's shares at record highs earlier in April, especially after the firm clocked surprisingly strong quarterly earnings and flagged a strong outlook on AI demand.
Reacting to the news, analysts at Wells Fargo said it "will be viewed as a positive." The investment bank explained that MU has noted its investment plans to support memory demand in the second half of the decade would be contingent on CHIPS support.
"In Oct '23 MU commenced construction of a new DRAM fab in Boise, ID; production to start in C2025," said the bank. "MU is also building a second DRAM fab in Clay, NY (near Syracuse) [with] construction to begin in 2024; production expected to ramp in latter half of the decade. MU submitted applications for CHIPS subsidies for both of these fabs in Aug '23."
Additional reporting by Sam Boughedda