U.S. Semiconductor Policy Shifts and Implications for Chipmakers

The U.S. semiconductor industry is undergoing a seismic shift in 2025, driven by aggressive policy reforms under the Trump administration. These changes, centered on strategic reshoring and industrial policy, are reshaping the competitive landscape for domestic chipmakers like Nvidia and AMD. Investors must now navigate a complex interplay of tax incentives, regulatory overhauls, and geopolitical trade-offs that could redefine the sector's trajectory.

Policy Overhaul: Tax Credits, Tariffs, and Regulatory Realignment

The cornerstone of the administration's strategy is the expansion of investment tax credits (ITCs) for semiconductor manufacturing. The bipartisan BASIC Act and Trump's "big, beautiful bill" have raised the ITC from 25% to 35% for companies building advanced manufacturing facilities in the U.S. by 2026, according to an ITIF analysis. This follows the CHIPS and Science Act's $39 billion in grants and $75 billion in loans, which have already spurred projects by Intel, TSMC, and Micron. However, the Trump administration has signaled a broader deregulatory agenda, including the potential repeal of Biden-era diversity, equity, and inclusion (DEI) requirements tied to CHIPS Act funding, according to the National Law Review.

Simultaneously, the administration has weaponized tariffs to pressure reshoring. A 100% tariff on imported semiconductors-excluding firms that commit to domestic manufacturing-threatens to disrupt global supply chains, as Wired reports. These tariffs, framed as national security measures under Section 232, could extend to consumer electronics and appliances containing foreign chips. Such policies aim to offset the U.S.'s higher production costs compared to Asian competitors but risk inflating costs for downstream industries like AI infrastructure and automotive manufacturing, per a Forbes analysis.

Nvidia and AMD: Navigating a New Economic Paradigm

The most controversial policy shift involves a revenue-sharing agreement with Nvidia and AMD. Under this deal, the U.S. government receives 15% of the companies' revenue from AI chip sales to China-a sharp departure from traditional export controls, according to Z2Data. This arrangement, negotiated after Trump initially demanded a 20% cut, allows firms to access China's lucrative AI market while funneling billions back to the Treasury. For example, based on pre-2025 sales figures, the deal could generate up to $3 billion annually, TechCrunch estimates.

While this model appears to balance national security and economic pragmatism, it raises legal and ethical questions. Critics argue it resembles an unconstitutional export tax, violating the Export Clause of the U.S. Constitution, according to the Peterson Institute. Additionally, the precedent could embolden future administrations to impose similar fees on other industries, creating regulatory uncertainty. For Nvidia and AMD, the agreement provides a lifeline to China's AI market but may strain relationships with global partners wary of U.S. overreach.

Strategic Reshoring and Financial Implications

The reshoring push has already triggered significant capital expenditures. Intel, for instance, has secured a 10% equity stake from the U.S. government and a $2 billion investment from SoftBank to bolster its foundry operations, CNBC reports. The company has also streamlined its business by spinning off its Network and Edge group, focusing on core manufacturing to align with federal priorities.

For investors, the key question is whether these policies can offset the inherent cost disadvantages of U.S. manufacturing. The 35% ITC and potential extensions under the reconciliation bill could make domestic production more viable, particularly for advanced nodes under H.R.2480. However, the administration's deregulatory stance-such as relaxing export controls on advanced semiconductors-introduces risks of intellectual property leakage and eroded margins, as Foreign Policy reports.

Investor Considerations: Opportunities and Risks

The U.S. semiconductor sector is poised for a period of high volatility. On the upside, extended tax credits and the $400–$500 billion projected investment in semiconductor design R&D could fuel long-term growth for firms like AMD and Nvidia, as an ITIF analysis noted. The revenue-sharing model, if replicated in other sectors, might create a new revenue stream for the government while allowing companies to access restricted markets.

Conversely, the administration's aggressive tariff policies and regulatory unpredictability could destabilize supply chains. A 100% tariff on imported chips, for instance, might force companies to accelerate reshoring but could also drive up costs for consumers and businesses reliant on affordable semiconductors. Additionally, the potential repeal of the CHIPS Act or renegotiation of its terms could disrupt ongoing projects, creating headwinds for firms like TSMC and Micron.

Conclusion

The Trump administration's semiconductor strategy represents a bold reimagining of industrial policy, blending tax incentives, tariffs, and revenue-sharing agreements to secure U.S. technological dominance. For chipmakers like Nvidia and AMD, the path forward is fraught with both opportunity and risk. Investors should closely monitor the implementation of the 35% ITC, the legal challenges to the revenue-sharing model, and the long-term effects of tariff-driven reshoring. While the sector's fundamentals remain strong, the success of these policies will hinge on their ability to balance national security imperatives with economic efficiency-a delicate act that could shape the future of global semiconductor markets.