The world is in the midst of an immense global semiconductor shortage that has created severe supply chain issues in an array of industries across the globe.
In response, Congress is considering legislation to subsidize the production of semiconductor chips.
Federal subsidies for domestic semiconductor manufacturing might not be a terrible idea, especially given that American companies are heavily dependent on Chinese produced semiconductors.
However, some members of Congress are attempting to cash in on the momentum for semiconductor subsidies.
After the CHIPS Act (legislation to subsidize domestic chip manufacturing) was introduced last June, Rep. Ed Perlmutter invested in several companies that would benefit from the subsidies.
The moves might not be especially noteworthy, except that Perlmutter sits on the House Committee on Science, Space, and Technology.
That just happens to be the committee where the House version of the CHIPS Act was first introduced in June of 2020.
Between July and November of last year Perlmutter loaded up on Apple, Microsoft and NVIDIA; all stocks that would benefit from federal subsidies to increase semiconductor chip manufacturing.
11/12/20 MSFT $1,000-$15,000 BUY
9/3/20 NVDA $1,000-$15,000 BUY
7/24/20 AAPL $1,000-$15,000 BUY
The House Science Committee is a body that would be especially privy to non-public information about the semiconductor sector.
Perlmutter’s trades caught the attention of Unusual Whales, a website that was founded to track Congressional insider trading.
Meanwhile, these members sat on or still sit on the House Committee on Science, Space, and Technology, which would be the first committee privy to non-public information on the semiconductor sector. Arguably, they should steer clear of investing in the sector out of an abundance of caution to avoid perceived conflicts of interest, but here we are: […]
- Rep. Ed Perlmutter is still holding AAPL and NVDA with purchases dating back to after the CHIPS Act was introduced in the House.
- AAPL is up +39%
- NVDA is up +10%
As of the market’s June 30th close Perlmutter is now up approximately 48% on Apple, 54% on Nvidia, and 25% on Microsoft.
Momentum for federal semiconductor subsidies appears to be increasing. Earlier this month the Senate passed its own version of legislation known as the Endless Frontier Act to boost domestic semiconductor production.
In its current form, the bill provides $52 billion for domestic semiconductor manufacturing, as well as a 30 percent boost in funding for the National Science Foundation and $29 billion for a new science directorate to focus on applied sciences.
When the House will take up the Senate legislation later this year remains to be seen.
However, the recent semiconductor trades from congressional insiders like Perlmutter present a serious ethical dilemma.
Perlmutter could be tasked with voting on a version of the CHIPS Act and/or Endless Frontier Act in the very near future, both in committee and on the House floor.
Regardless of whether Perlmutter holds and cashes in his tech holdings after the legislation is passed or sells beforehand, he’s already capitalized on a tech run that has been propelled by Congressional momentum to pass these subsidies.
How is that not a glaring conflict of interest?
“It appears we can’t rely on our elected officials to see how messed up this is,” Unusual Whales wrote.