China's memory chip makers are pushing into the lower end of the market even as the country faces an increasingly steep uphill battle to achieve its self-sufficiency goals amid ongoing geopolitical tensions and a global semiconductor shortage that's expected to run into next year, according to South China Morning Post.
Yangtze YTMC and Changxin Memory Technologies represent a new disruptive force in the sector and are expected to increase global capacity by 29 percent between 2020 and 2022, economists from investment bank Natixis said on Wednesday.
TheStreet's Jim Cramer is eyeing Applied Materials (AMAT) - Get Report and other semiconductor capital equipment stocks. "They haven't let us down," Cramer said in a conversation with TheStreet's Katherine Ross. "When you get that group going, that's the best leadership group there is," he added.
Cramer also said Monday that the key to the market for him is still the Nasdaq. "We need to see Advanced Micro Devices (AMD) - Get Report not get beaten down by Nvidia (NVDA) - Get Report... We need to see all sorts of technology stocks keep up with what I regard as a runaway industrial market," he said.
For more in-depth coverage of the semiconductor sector including trading recommendations and investment strategies, follow Eric Jhonsa on Real Money.
Nvidia is still dominating the semiconductor market. And in terms of diversifying, Nvidia CEO Jensen Huang’s acquisition strategy has helped the firm branch into the automotive industry through high-profile partnerships through its NVIDIA drive network as well as data centers, aided by the acquisition of Mellanox, as well as AI technology through its anticipated takeover of Arm.
While the semiconductor industry is certainly crowded, Nvidia has managed to set itself apart beyond its firm base in gaming and graphic chip dominance. As such, it might also be a perfect candidate for mention alongside the long-time tech leaders. Also, its market cap is a healthy $400+ billion, adding to its potential to fit with the rest of the group, according to TheStreet's Kevin Curran.
Nvidia is also among companies that have noted a degree of uncertainty in predicting the impact of cryptocurrency mining on near-term sales.
"It's hard to estimate exactly how much and where crypto mining is being done. However, we can only assume that the vast majority of it is contributed by professional miners, especially when the amount of mining increases tremendously like it has," CEO Jensen Huang told investors on a conference call this past week.
TheStreet's Jim Cramer noted in his daily Action Alerts Plus rundown this past week that while Nvidia has performed well and its recent 4-for-1 stock split makes sense, the link between cryptocurrency mining and Nvidia’s performance is not necessarily that strong.
Nvidia has submitted an application to Chinese competition regulators to review its proposed $40 billion takeover of the U.K. chip designer Arm, according to the Financial Times. The chip company announced the deal about eight months ago and said it expects to close the deal by next March.
Nvidia's application was made in recent weeks and sets in
motion a period of scrutiny that could take up to 18 months, according to Chinese antitrust lawyers, the Financial Times reported. In February, U.S. federal regulators opened an investigation into Nvidia's agreement to purchase Arm.
The company said it expects third-quarter revenue of about $6.75 billion, higher than expectations of $6.6 billion. In addition, the company estimated adjusted EBITDA would 60% of projected revenue, or about $4.05 billion, above estimates of $3.88 billion.
“Due to the strength in demand for semiconductors across our multiple end markets, we delivered 20% year-over-year
increase in semiconductor revenue,” said CEO Hock Tan.
“Our third-quarter outlook projects this year-over-year growth to sustain, as we continue to see strong demand from service providers and hypercloud.”
Cramer is watching the semiconductor capital equipment stocks closely, which he said: "had let us down." "There was a belief that there was a glut of certain kinds of chips," he added.
"And even though a lot of people were worried about the supply of chips, a lot of the smartest people were saying, listen, get out of the semiconductor-capital stocks and there isn't a glut. There is a glut developing of a certain kind and Applied Materials kind of straightened that out."
Here is a list of the semiconductor stocks to watch and their performance by percentage change at the close of trading on Tuesday, June 8:
Large-cap tech stock Nvidia (NVDA) - Get Report is cruising higher. The company's stock rose after the semiconductor maker reported fiscal-first-quarter earnings and revenue that topped analyst expectations. Nvidia reported quarterly earnings of $3.66 a share on revenue of $5.66 billion. Analysts were expecting earnings of $3.29 a share on revenue of $5.4 billion.
Joel Kulina, SVP of Equity Trading at Wedbush Securities, argues for the addition of both Microsoft (MSFT) - Get Report and his chosen semiconductor stalwart Nvidia to result in the catchy FANGMAN, wrote TheStreet's Kevin Curran. “FANGMAN has been one of the better ones I’ve come across, easy to say; includes large-cap growth names across various pockets of tech.”
Nvidia would fit in well as its dominance in graphics chips has helped the firm assert a dominant market share in graphics cards, clocking in at a whopping 82% market share per Jon Peddie Research.
TheStreet Quant Ratings rates Nvidia as a Buy with a rating score of B.
He called out the bull market in semiconductor equipment. We need to make more chips, he said, and companies like Applied Materials can make that happen.
The semiconductor equipment major reported mixed fiscal-second-quarter earnings and received a number of positive reviews and price-target upgrades from Wall Street analysts.
TheStreet Quant Ratings rates Applied Materials as a Buy with a rating score of A-.
AppleInsider cited TF International Securities analyst Ming-Chi Kuo as the person making its prediction. Kuo sees Qualcomm having to change its strategy to combat order losses from Apple.
Jim Cramer recently said investors should "own Qualcomm stock."
TheStreet Quant Ratings rates Qualcomm as a Buy with a rating score of B+.
The Eindhoven, Netherlands, chipmaker reported that it earned $1.25 a share compared with a loss of 8 cents a share in the year-earlier quarter. Revenue reached $2.57 billion from $2.02 billion.
TheStreet Quant Ratings rates NXP Semiconductors as a Buy with a rating score of B.
Advanced Micro Devices
Analyst Cody Acree said he expected "the firm’s leadership to continue to drive share gains for at least the next few years."
TheStreet Quant Ratings rates AMD as a Buy with a rating score of B.
Taiwan Semiconductor Manufacturing
Cramer recently said that if investors think chips are truly in short supply and we need capital equipment, then the company they most need is Lam Research (LRCX) - Get Report, other than Taiwan Semiconductor Manufacturing (TSM) - Get Report.
Cramer spoke recently about picking stocks against a broad worldview, and Taiwan Semiconductors was discussed.
"For me, I'm particularly concerned about the Chinese making a move on Taiwan. We're squeezing their critical companies to the de facto takeover of Taiwan Semiconductor. I don't want inflation to be so raging that Jay Powell can't engineer a soft landing," Cramer said.
TheStreet Quant Ratings rates TSM as a Buy with a rating score of A.
Micron Technology (MU) - Get Report recently announced the successful closing of nearly $3.7 billion inaugural sustainability-linked credit facilities.
The facilities, which create additional long-term value for Micron's stakeholders, reinforce the company's commitment to sustainability and 2030 environmental goals.
TheStreet Quant Ratings rates Micron as a Buy with a rating score of B.
From early November to mid-February, Broadcom really found its groove. Shares rallied more than 40% in that span as the chipmaker saw its stock glide higher. While Broadcom topped out around the time that other high-growth stocks did, it didn’t suffer the same fate as those caught in the ensuing bear market.
"This is a high-multiple stock that has people spooked. I own it for my charitable trust and you should, too." Cramer recently said of Broadcom during a Mad Money Lightning Round.
TheStreet Quant Ratings rates Broadcom as a Buy with a rating score of B.
Analyst Cody Acree said in a research note that AMD's management, led by Chief Executive Lisa Su, "has developed a base processor architecture (Zen), and its generational improvements, that have proven over the last few years to be highly competitive - and often superior - to Intel’s (INTC) - Get Report designs, particularly with AMD using Taiwan Semiconductor’s most advanced commercial volume lithography process."
In January Su unveiled the Ryzen 5000 Zen 3 series, a new generation of mobile and desktop gaming chips.
"While Intel has struggled to respond with a trump architectural offering, its biggest challenge ... has been that Intel mismanaged its pace of bleeding-end manufacturing technology, leaving the company at a disadvantage to the leading foundry providers," Acree said.
With Intel somewhat handcuffed, the analyst added, "AMD has been able to capitalize on the opportunity and has been gaining broad market share over the past few years."
Intel, despite what the company keeps saying, is nowhere, according to Cramer. "Yes, it bothers me right now that the stock is down a buck. Yes! It's killing me! And Intel keeps saying that they're going to pass AMD any minute. That's nonsense," Cramer said.
TheStreet Quant Ratings rates Intel as a Buy with a rating score of A-.
The company reported first-quarter revenue of $4.29 billion vs. the analyst consensus of $4.00 billion, while adjusted earnings came in at $1.87 per share versus consensus estimates for $1.58 per share. Operating income for the quarter was $1.94 billion vs. consensus estimates of $1.71 billion.
TheStreet Quant Ratings rates Texas Instruments as a Buy with a rating score of A.
AMD, Broadcom, and Nvidia are key holdings in Jim Cramer's Action Alerts PLUS charitable trust. Want to be alerted before Jim Cramer buys or sells any stock? Learn more from Cramer and his membership team now.