Senate Finance Committee Chair Mike Crapo (R‑ID) and Ranking Member Ron Wyden (D‑OR) released a joint statement in August to support extending the CHIPS and Science Act’s advanced manufacturing investment tax credit. The credit is set to expire for projects that begin construction after December 31, 2026. Industry groups want it extended and expanded, possibly as part of a year-end tax package.
Since it became law in 2022, the credit’s official cost has almost tripled, and a permanent extension could cost between $125 billion and $325 billion in total. The credit primarily funds projects for a few large firms, and most of the investments would likely have happened anyway.
Extending the CHIPS Act credit would also provide new subsidies for the AI data center buildout that lawmakers are otherwise trying to curtail. Efforts to limit data center construction through new restrictions or special taxes are economically destructive and should be opposed, but data centers shouldn’t be subsidized either. For lawmakers concerned about AI subsidies, the easiest thing they can do is let the CHIPS Act tax credit expire.
A Subsidy That Could Cost Hundreds of Billions of Dollars
The CHIPS Act appropriated direct funding and created a tax credit to subsidize semiconductor fabrication facilities. The grant and loan program included $39 billion for projects selected through an application process run by the Commerce Department. The new Section 48D of the tax code created a 25 percent credit for investment in chip fabrication plants and equipment. Firms can elect to receive the credit as a direct payment, refunded in cash to the extent it exceeds their tax liability.
At passage, the congressional scorekeepers estimated that the credit would cost $24.3 billion between 2022 and 2031 and $6.6 billion in 2025. A few years later, the 2025 fiscal cost was revised up by about 20 percent, to $8 billion.
The 2025 reconciliation law raised the credit to 35 percent of qualified investment in projects placed in service after December 31, 2025. The 2026 start-of-construction requirement was not changed; under Treasury rules, a project that begins construction in 2026 can be placed in service up to 10 years later and still claim the credit. The expanded credit is estimated to cost an additional $14.9 billion.
The official congressional scores imply that the credit will cost more than $70 billion under current law, assuming it expires as scheduled. However, outside estimates put the numbers much higher. One report asserted that the original 25 percent credit was likely to cost $100 billion, and a recent CHIPS Communities United estimate of the expanded credit’s lifetime current law cost, based on announced investments, put it at $205.6 billion, which is likely an overstatement.
Using the official and outside figures as low and high estimates of the CHIPS Act tax credit’s fiscal cost implies that a permanent version of the credit could have a 10-year cost of between $125 billion and $325 billion.
Billions in Taxpayer Subsidies to Individual Firms
At least 28 publicly traded companies say they have claimed, or expect to claim, the CHIPS Act tax credit, according to our review of Securities and Exchange Commission (SEC) filings that mention it from August 2022 through November 2026. Nineteen of those disclose a specific dollar amount. Together, they have reported at least $14.7 billion in CHIPS Act credits.
Intel alone accounts for $9.9 billion, two-thirds of the disclosed total. Intel, Texas Instruments, Wolfspeed, and Applied Materials make up 90 percent. Two of those four, Intel and Wolfspeed, are now partly owned by the federal government. For most firms, the tax credit is significantly larger than the other CHIPS Act funding. Intel recognized $5.4 billion in credits in 2025 alone, seven times the $769 million in CHIPS grants it reported that year.
Some of the largest tax credit–qualifying investments are missing or obscured in the data. Samsung, SK hynix, and GlobalWafers don’t file with the SEC. Taiwan Semiconductor Manufacturing Company (TSMC), Micron Technology, and Rocket Lab report the credit lumped together with grants and sometimes incentives from other countries. Reported estimates suggest that the missing figures are as large as, or larger than, the reported figures.
The value of the tax credit for Micron’s first two of four Central New York fabrication plants is estimated at roughly $16 billion. Using Peterson Institute estimates from January 2025, TSMC’s Arizona fab could qualify for $16.25 billion in tax credit subsidies and Samsung’s Texas project for $11.25 billion. Other firms have so far reported only a fraction of the expected credit value to the SEC. Texas Instruments has reported about $1.6 billion in cash benefits from the credit so far, of its expected $6 billion to $8 billion in credits for three planned projects.
Most Projects Don’t Need Subsidies
Most of the credits are a windfall profit, creating a payment for investment that would have happened anyway. Chipmakers facing a global shortage and growing demand will add capacity without subsidies, and many were already doing so before Congress acted.
The Census Bureau’s measure of monthly private construction of computer, electronic, and electrical factories (Figure 1) rose from an annual rate of about $7 billion in early 2021 to $45 billion in August 2022, the month the CHIPS Act was signed into law. The measure also includes battery plants, but the construction surge began well before the CHIPS credit or the Inflation Reduction Act’s battery credit was law.
The trend also undermines the idea that firms were building in anticipation of the subsidy. By excluding spending before enactment, the credit created an incentive to pause new development rather than accelerate it. Spending accelerated anyway while Congress was still debating the bill, and many of the largest projects predated the legislation. TSMC announced its Arizona fab in May 2020, two years before the law. Texas Instruments and Samsung both announced new Texas fabs in November 2021, and Intel broke ground in Arizona in September 2021.
Looking at the CHIPS Act grant programs, Jack Salmon found a similar pattern: 65 percent of the grant dollars he could match went to projects announced before the law was signed and 27 percent to projects announced before the bill was introduced. Similarly, Scott Lincicome found that a large share of announced major US semiconductor investments that were claimed as CHIPS Act’s successes occurred months or even years before the law was enacted.
A Backdoor AI Subsidy
The factories the CHIPS Act subsidizes produce the central components used in data centers. As the Semiconductor Industry Association puts it: “Without semiconductors, there would be no AI.” TSMC’s Arizona fab now makes wafers for Nvidia’s Blackwell AI processors. SK hynix’s Indiana plant will produce high-bandwidth memory for AI processors. A growing share of the federal tax credit is being used to pay for additional AI capacity.
The AI-driven data center boom has produced a public backlash that puts the CHIPS Act credit at odds with where the rest of policy is heading. States have begun to pause or repeal data center subsidies. In Congress, Wyden has proposed new data center taxes and denying data centers bonus depreciation, Opportunity Zone benefits, and other generally available tax provisions. Sen. Josh Hawley (R‑MO) introduced the No Tax Breaks for Data Centers Act, a narrower version of the same idea. Most of the provisions targeted for repeal are generally available and not true data center subsidies.
The CHIPS Act tax credit is different. A cash-payable credit, costing tens of billions of dollars and worth 35 percent of qualifying investments, is a subsidy by any measure. The easiest way for Congress to stop subsidizing data centers and the AI buildout is to let Section 48D expire on schedule.
Santiago Forster assisted with this research.
