GlobalFoundries (GFS) shares are pushing higher on Wednesday after the chipmaker said it has been selected to operate two new semiconductor factories under a U.S.-Japan initiative. According to GFS's press release, Japan will invest up to $21 billion in total, helping the company meaningfully expand its manufacturing footprint in Malta, New York.
Despite today’s gains, GlobalFoundries stock is trading at about half its year-to-date high.
Significance of the U.S.-Japan Initiative for GFS Shares
Japan will provide about $10 billion for the first factory, expected to become operational in 2029, with another $10 billion earmarked for the second facility. Each could eventually add about 900,000 300-millimeter wafers of annual capacity.
The announcement is positive for GFS shares because the semiconductor company will earn fees for building and operating the plants and licensing its technology; US and Japanese interests will own the facilities.
That structure offers a potentially attractive route to expansion without requiring GlobalFoundries to supply all the construction capital itself.
Initial customers include Apple (AAPL) and Renesas (RNECY), giving the project commercial relevance beyond its geopolitical appeal.
What Else Makes GlobalFoundries Stock Worth Buying?
Beyond the headline-driven surge, there’s an existing profitable business behind GlobalFoundries shares, which makes them an attractive pick for long-term investors.
In Q2, the company reported $1.79 billion in revenue and $0.46 per share in earnings (EPS), both ahead of Street estimates, while its non-IFRS gross margin jumped 470 basis points to 29.9%.
Even from a technical perspective, GFS appears poised for continued gains ahead. On Wednesday, the semiconductor company broke above its 20-day and 50-day moving averages (MAs), indicating that bulls have taken back control of the near term.
Plus, GlobalFoundries’s relative strength index (RSI) sits in the late 40s, indicating buying pressure is likely in the early stages only.
Wall Street’s Consensus View on GlobalFoundries
Crucially, Wall Street analysts also believe GFS stock is significantly undervalued at current levels.
According to Barchart, the consensus rating on GlobalFoundries sits at “Moderate Buy” as of this writing, with the mean price target of about $75 indicating potential for an exciting 50% rally from current levels.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.