GlobalFoundries: Government Grants of $2.1 Billion Makes Expansion Costs Easier to Accept

After GlobalFoundries announced additional expansion plans and its eligibility to receive a combined $2.1 billion in U.S. state and federal funding under the Chips and Science Act, we have lifted our fair value estimate to $48 a share from $45. We expect gross margin improvement to be limited as competitors are also motivated to add capacity through subsidy support and an optimistic semiconductor outlook. We therefore believe that GlobalFoundries’ shares are currently fairly valued.