Buyback rule tied to CHIPS Act would be ‘significant’ for TI, says Credit Suisse

Credit Suisse analyst Chris Caso notes that Bloomberg reported that Democratic lawmakers wrote a letter to the U.S. Commerce Department asking that companies that accept CHIPS Act funding be restricted from engaging in buybacks for at least 10 years, which would have "significant implications" across the space, particularly for Texas Instruments (TXN), if Commerce were to accept such a provision. Though the firm said it doesn’t have any information about the chances of Commerce accepting such a provision, the addition of such a rule would "create a significant disincentive for companies to accept such funding" and TI would be most affected since the company has a firm commitment to return 100% of free cash flow to investors and buybacks are "a main vehicle for doing so," Credit Suisse said. Intel (INTC) would be less affected in the near term, "simply because they are not currently generating any excess cash," added the firm. Credit Suisse expects GlobalFoundries (GFS) to also submit CHIPS Act applications for their investments in New York state and although the company has not done significant buybacks, the firm thinks any restrictions on returning cash "would likely be disappointing to investors." Credit Suisse has Neutral ratings on Intel and Texas Instruments and an Outperform rating on GlobalFoundries.