Why Intel, GlobalFoundries Are Gaining as Nvidia and Other Chip Stocks Drop

Intel ( $Intel(INTC.US)$ ) and GlobalFoundries ( $GlobalFoundries(GFS.US)$ ) shares rose on Wednesday amid concerns about tightening trade restrictions and rising geopolitical tensions affecting the chip industry. GlobalFoundries led gains on the Nasdaq, up more than 6%, while Intel climbed close to 2%. Conversely, Nvidia ( $NVIDIA(NVDA.US)$ ) and other chip stocks tumbled, with ASML ( $ASML Holding(ASML.US)$ ) falling nearly 12% and the VanEck Semiconductor ETF ( $VanEck Semiconductor ETF(SMH.US)$ ) down 6%.

Intel and GlobalFoundries, which have U.S.-based manufacturing capabilities, could benefit from increasing support for domestic chip production amid geopolitical tensions. The Biden administration is reportedly considering stricter trade restrictions on exports to China, potentially hurting sales for ASML and other chip-related companies.

The CHIPS and Science Act, which invests billions to support U.S. chip manufacturing, aims to reduce reliance on foreign production. This has become increasingly relevant as the U.S. contemplates implementing the foreign direct product rule (FDPR) to curb exports of goods made in other countries using American technology.

Additionally, former President Donald Trump's comments on Taiwan's defense payments to the U.S. have added to geopolitical worries, impacting companies like Taiwan Semiconductor Manufacturing Company ( $Taiwan Semiconductor(TSM.US)$ ), a major supplier for Nvidia, $Qualcomm(QCOM.US)$ , and $Advanced Micro Devices(AMD.US)$ .