Semiconductors & Semiconductor Equipment
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INTC $21
18 Sep 2024 |
Can Intel really pull off the formation of a successful US foundry?
The semiconductor world can be a confusing place, but investors should have a basic knowledge of key categories within this industry to know what to buy and when to buy it—and which companies to avoid like the plague. A brief look at $90 billion Intel (INTC $21) is a great starting point for the discussion. Most people assume that companies like Intel, AMD, Nvidia, and Qualcomm make computer chips, but that is not really the case. These companies design advanced microprocessors for computers, smartphones, and a growing number of connected devices, but they overwhelmingly outsource their production to foundries for manufacture. The majority of this production takes place in Taiwan, which is why China's aggressive stance toward the island is of such a major concern (well, that and the fact that they want to destroy democracy in the region). This reliance on Taiwan for advanced chips, despite being such a staunch US ally, is such a high national security concern that the US government has given billions of dollars to help Intel create its own foundry. This is an enormous undertaking, and one which has been hampered by competitors' concerns that Intel will gain access to their intellectual property for their own benefit. To assuage this fear, CEO Pat Gelsinger announced that the foundry will become an independent subsidiary, complete with its own board of directors. In the wake of this announcement, Intel signed a multi-billion deal with Amazon Web Services (AWS) to make some of its AI chips. Back in February, a similar deal was inked with Microsoft. Intel is still sitting at the base camp of a huge mountain with respect to its foundry business, but its deep-pocketed supporters seem willing to give the company all the supplies needed for the trek. Now, it is up to Intel to make this monumental climb. Separating the foundry business was a good first step. Investors have been burned time and time again by owning Intel shares, But is this time different? If the company can actually create a successful foundry enterprise within the US, the implications would be enormous. We are rooting for their success, but are still not sure about the ultimate outcome. Down from a high of $76 per share, we may look back on the current price of $21 and wonder why we didn't jump in. |
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NVDA $1,035
23 May 2024 |
Nvidia just had an incredible quarter; a stock split is on the way
Precisely three months ago to the day, we reported on AI chip designer Nvidia's (NVDA $1,035) "crazy-good quarter." We are running out of adjectives to use for this firm's performance on the heels of a quarter that just eclipsed the previous one. Sales jumped 262% (not a typo) in the fiscal first quarter from the previous year, to $26 billion, and earnings came in at $6.12 per share; both numbers handily beat Wall Street estimates. Guidance for the second fiscal quarter of the year calls for $28 billion in revenue, and we have little doubt that the number will be reached. Shares were trading up double digits at the open following the release. Just a reminder of what Nvidia does. In macro terms, think of it as the engine of AI. It provides a complete hardware and software package for companies operating within this new realm. It is the world's leading designer of graphics processing units (GPUs) which were traditionally used in gaming platforms, but are now an integral part of artificial intelligence. No one single company benefits more from the adoption of AI than Nvidia. Going into Thursday morning, Nvidia was a $2.3 trillion company sitting in size only behind Microsoft and Apple. By the day's close, it carried a market cap in excess of $2.6 trillion, just 10% below Apple's market cap. Putting its growth in perspective, the company's shares were selling for around $100 apiece back in October of 2022. Along with the blowout quarterly results and the $1,000+ share price came news that the company would execute a ten-for-one stock split as of market open on June 10th. This would put them back around the $100 range, making the company more attractive to many retail buyers (though the valuation doesn't change due to a split, of course). In other words, we don't see their share price or the company's 39 forward multiple dissuading new buyers from jumping in. In addition to the obvious customers such as Amazon, Meta, Microsoft, and Google, Nvidia is also working with over 300 companies in the autonomous driving space. Cash rich, growing free cash flow, and accelerating revenue growth; it is difficult not to love this firm. Not only is Nvidia a member of the Penn New Frontier Fund, it is also a top holding in several ETFs within the Penn Dynamic Growth Strategy. |
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NVDA $800
23 Feb 2024 |
NVIDIA's crazy-good quarter makes it third-largest company in the world
Just how good was NVIDIA's (NVDA $800) quarter? Consider this: The company added over $200 billion to its size after reporting its Q4 results—the largest one-day market cap spike in history; and it leapfrogged over Amazon and Alphabet to become the third-largest publicly traded company in the world—behind only Microsoft ($3T) and Apple ($2.9T). (Granted, an argument could be made that Saudi Aramco has the same $2T market cap.) Consider NVIDIA the picks-and-shovels company for the AI revolution, providing both hardware and software solutions to virtually every company which boasts an AI presence. Business is so good at Jensen Huang's firm that it is scrambling to try and keep pace with demand. The seasoned CEO used terms like "tipping point" and "astronomical" to describe sales, and that was not hyperbole. Sales more than tripled in the fourth quarter from a year earlier, and earnings surged over eightfold. That almost seems impossible. All results easily exceeded analysts' expectations, leading NVDA shares to surge 15% out of the gate on Thursday and fomenting a massive rally across the industry. The tech companies surrounding NVIDIA in size all require its hardware, leading to a virtuous cycle we don't see ending anytime soon. What does NVIDIA's rocking quarter mean to the NASDAQ specifically and the markets overall? At the very least it was a shot in the arm, but Huang sees something much bigger. He believes that "a whole new industry is being formed" around AI. If that turns out to be the case, it is seismic. We remember getting prematurely excited about concepts from the metaverse to 5G to supercomputing, but this does feel different. The CEO sees a new wave of investments worth trillions of dollars kicking into gear, and a doubling in the number of data centers around the world over the next five years. Then again, we remember firsthand this same kind of talk about the "new economy" we were entering into some twenty-five years ago. That period ended with 78% of the NASDAQ's market cap erased. However, right now NVIDIA has a quite respectable forward P/E of 33; back in 1999, Yahoo! (for example) had a P/E of 1,100, and Cisco (one of the largest companies in the world at the time) had a multiple of 230. So it is safe to say we are not quite at tech bubble levels. In other words, let's celebrate the quarter and enjoy the ride. Speaking of data centers, if Huang's predictions are right it would behoove investors to look at three major data center REITs: Prologis (PLD $134), Digital Realty Trust (DLR $138), and Equinix (EQIX $882). We have owned all three in various Penn strategies. |
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ARM
08 Sep 2023 |
The stage is set for the largest IPO in two years as Arm roadshow begins
If investors were excited about the recent Cava Group (CAVA $41) IPO (and they were), then they should really be excited about what is about to hit the market: shares of British semiconductor firm ARM Holdings. After all, one is a restaurant chain with enormous overhead and thin margins; the other designs and sells the most advanced semiconductors in the world. Formerly trading under the symbol ARMH, the company was purchased and taken private by Masayoshi Son’s Softbank back in 2016 for $32 billion. Now, just over seven years later, the company is getting ready to public once again, this time under the symbol ARM and with a valuation north of $50 billion. The firm will issue 95.5 million American depository receipts (ADRs), with each representing one ordinary share in a planned range of $47 to $51 apiece. Extrapolate that number out to the billion or so shares outstanding after the IPO, and we get a market cap in the $50 billion range. While that is just one-third the size of Intel (INTC $38) and nowhere near NVIDIA’s (NVDA $461) $1.1 trillion market cap, expect that fact to only amplify investor interest. Arm Holdings does not make chips. Instead, it designs the cutting-edge processors which power nearly all smartphones in the world. It then licenses those designs to Intel, NVIDIA, AMD, Apple, Samsung, and virtually every other device-maker in the world, receiving royalties from every unit sold. And the designs aren’t limited to smartphones. It is estimated that nearly 70% of the world’s population uses an Arm-based device—from smartphones to servers to ordinary sensors. With the coming AI boom, the company’s reach will be nearly unprecedented. Expect to see the company trading on the NASDAQ as soon as this coming week. We may be tempted to pick up shares of ARM out of the gate, but we expect demand to drive the price up as soon as the shares begin trading. If, for example, they shoot up to the $60s or higher, we would wait for the inevitable pullback to the $45 range. Expect this IPO to start a wave of other high-profile tech names going public—a welcome sign after two years of relative silence in the space. |
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MU $90
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Our Micron position spikes nearly double digits on strong earnings report
(21 Dec 2021) We added leading US semiconductor and component maker Micron Technology (MU $90) to the Penn New Frontier Fund just under two months ago at $69.35, with an initial price target of $90. It didn't take long to reach that mark: shares of MU spiked nearly double digits on the morning following a stellar quarterly earnings report. Revenues rose 33% from a year ago, to $7.69 billion, while net income rose from $803 million in the fiscal first quarter of last year to $2.31 billion in the same quarter of this year. The company reported that revenue from dynamic random access memory chips, or DRAM, was up 38% from last year. DRAM chips, which provide low-cost and high-capacity memory, accounted for 73% of total revenue in the quarter; these are the critical chips which will power devices in the world of 5G and the Internet of Things. Chief Business Officer Sumit Sadana was highly bullish on Micron's future in the metaverse, which he said should provide the company with a "tremendous potential demand" going forward. Founded in 1978, Micron employs 43,000 workers and is headquartered in Boise, Idaho. While it reached our target price much quicker than we expected, we are not considering trimming our position. With the global chip shortage, unprecedented demand on the horizon, and a domestic manufacturing capability, we expect Micron to be a shining star in the portfolio going forward. |
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INTC
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For true believers, Intel shares seem to be sitting at a decent buy-in point; we remain cautious
(23 Apr 2021) While we have talked glowingly about Intel's (INTC $59) new wonkish CEO, Pat Gelsinger, we still haven't pulled the trigger on re-adding the semiconductor maker to any of our portfolios. Management is saying the right things, and we applaud the company's decision to expand their own US manufacturing footprint, but we want to see some results first. A new data point did just roll in; unfortunately, it was not on the bullish side of the scatter plot. Shares of the $242 billion firm were off over 5% on Friday after announcing a strong drop in data center revenue—its most profitable segment—and a decline in gross profit margin. Sales from the Data Center Group fell 20% in the first quarter, year-over-year, well below what analysts were expecting. One anecdotal yet disturbing sign for the group came last month from tech giant Amazon (AMZN $3,370): the company announced that it would begin designing its own data center chips in-house. Intel has made a string of very smart acquisitions over the past several years to take market share in the AI and EV segments, but it is going to take precision execution on management's part for the company to become a vibrant player in those nascent areas. If played correctly, the severe supply chain disruptions which led to the global chip shortage could provide Intel a nice tailwind. We will remain on the sideline while a few more chapters are written. |
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INTC
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Intel hires a wonkish tech guy as the company's new CEO...and the move was a brilliant one
(14 Jan 2021) For at least the past year we have been hearing about Intel's (INTC $59) imminent demise, and for at least the past year we have poked holes in that narrative. In fact, we have said that Intel is one of the unloved, undervalued darlings ready to take off in 2021. In the most recent move supporting our premise (besides the impressive jump in the share price year-to-date), the company has announced that CEO Bob Swan would be replaced next month by wonkish tech veteran Pat Gelsinger. Gelsinger, considered a brilliant semiconductor engineer, is currently the CEO of VMware (VMW $133), and the perfect fit for Intel going forward. Somewhat ironically, Gelsinger left Intel eleven years ago when it became clear that he would not be tapped for the lead role at the company; Brian Krzanich ultimately got that spot. When Bob Swan replaced Krzanich in 2019, pundits were worried. Swan was a financials guy, not the tech guru the company needed to pull itself out of a nosedive. But analysts are singing a different tune this time, with some even comparing Gelsinger's return to Intel with Steve Jobs' return to Apple. That comparison comes with some stratospheric expectations, but we believe the move will at least be comparable to Microsoft's hiring of Satya Nadella in 2014; and that would be good enough for us. Not everyone is convinced that this move can turn the giant battleship around, especially with the likes of NVIDIA (NVDA) and Advanced Micro Devices (AMD) snatching up market share. We point to the difference in multiples, however (INTC's 11 vs NVDA's 88 and AMD's 123), and remain faithful to the notion that Intel will gain the most ground (among these three) in 2021. |
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QCOM
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Should we sell our rocketing Qualcomm now that one of our favorite CEOs is abruptly stepping down?
(07 Jan 2021) Fundamental analysis, as opposed to technical analysis, is at the heart of selecting the right investments for a portfolio (though chartists would certainly disagree). And fundamental analysis goes beyond the financial statements; a wise investor must consider the strategic vision of a company, and the tactics being employed to achieve that vision. Weak or mediocre management teams have an excuse at the ready for every problem that arises. Strong teams, led by a true leader at the helm, create the right strategy, deploy the right tactics, and embolden the workforce to excel. American semiconductor giant Qualcomm (QCOM $155), led by the analytically-minded Steve Mollenkopf, certainly fits the template of the latter. While an engineer by training (he holds two electrical engineering degrees), Mollenkopf is one of those rare individuals who is equally at ease with semiconductor schematics and boardroom meetings. He is the quintessential leader. That is why we were shocked to hear that the 52-year-old CEO of the San Diego-based firm would be retiring this year. He will be replaced this coming June by the company's president, Cristiano Amon, who also hails from an engineering background. The challenges that Mollenkopf faced in his tenure were massive, from a hostile takeover bid by Broadcom to a licensing fight with Apple to regulatory scrutiny from numerous countries. He handled all of them masterfully, but how will Amon face the similar challenges which are sure to arise in this cutthroat industry? The 50-year-old has been with Qualcomm most of his career and has worked directly under Mollenkopf for the past several years, so he certainly has his bona fides in place. Only time will tell how adept he will be at navigating through crises, but the company is on the right course to take full advantage of the coming 5G revolution. Qualcomm collects royalties on the majority of 3G, 4G, and 5G handsets sold, holding the essential patents for the components used in these networks. All major handset OEMs are under license, with a total of 110 5G deals on the books. Our Qualcomm holding, which is in the Penn New Frontier Fund, is up triple digits from its purchase, and we see plenty of growth ahead. That being said, we are putting the company on our watchlist simply due to the change in leadership. |
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QCOM
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New Frontier Fund Member Qualcomm surges double-digits on earnings, 5G prospects
(06 Nov 2020) When we added $165 billion semiconductor maker Qualcomm (QCOM $145) to the Penn New Frontier Fund it had a market cap of $80 billion and was generally being ignored by the analysts. We had two major theses for our purchase: 1. the company would dominate in the era of 5G; 2. Steve Mollenkopf was one of the best CEOs in America. After a 100% run-up in the share price, analysts are suddenly paying attention. The latest one-day, double-digit price spike of QCOM shares came on the heels of the firm's fiscal Q4 results. Revenue climbed an impressive 73% from one year ago, from $4.81 billion to $8.45 billion, and net income spiked from $506 million in the same quarter last year to $2.96 billion (a good portion of which came from an IP settlement with Huawei) this past quarter. Mollenkopf's comments also helped the share price: the CEO said the company was poised to sell millions of chips for 5G mobile devices as consumers upgrade their smartphones. Despite the massive run-up in share price, QCOM has a lot of room to run. The company will be one of the dominant players in the nascent world of 5G technology. |
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AMD
INTC |
AMD to buy Xilinx in another shot at rival Intel, but who is under greater pressure to perform?
(27 Oct 2020) When evaluating stocks, one of the most useful methods involves comparing a company's key stats to those of other companies in the same industry. Typically, the numbers are relatively aligned, but every now and again one notes a glaring discrepancy. Take two semiconductor giants: AMD (AMD $82) and Intel (INTC $46). The former has a market cap of around $90 billion, and the latter's size is over double that. The big discrepancy comes in the multiple investors have placed on each. While AMD carries an enormous PE of 150, Intel's multiple is just 9! That seems crazy for two companies which do, basically, the same thing. In essence, investors have no confidence in Intel's ability to pull out of its funk, while they are willing to give AMD's quite effective CEO Lisa Su every benefit of the doubt. Su's most recent move, announced this week, is the acquisition of data center and cloud computing semiconductor maker Xilinx (XLNX) for $35 billion. At face value, the move appears brilliant, as the acquisition will complement—not duplicate—AMD's current chip focus and will allow the firm to yank market share away from Intel. In an effort to expand its own chip lineup, Intel purchased cloud chipmakers Altera and Mobileye (think autonomous vehicles) back in 2015 and 2017, respectively, but those acquisitions have yet to bear much fruit. Xilinx, which makes field-programmable gate arrays (FGPAs can be reprogrammed after they are manufactured), makes chips for the automotive and aerospace industry in addition to its data center business. We say the move by AMD appears brilliant but it will also be very expensive, considering the $35 billion price tag equates to 38% of AMD's market cap. The firm must execute the integration with precision, as it has very little room for error. On the flip-side, investors have written off deep-valued Intel. This will be interesting to watch play out. Call it the contrarian in us, or simply our recollection of what happened to high-flyers in 2000, but we would buy Intel right now (at $45) over AMD. Some would argue that Intel is a value trap, but the firm still controls the lion's share of the PC and server market, and it is investing in R&D like a nimble startup. It wouldn't take much for its shares to pop 50% and still appear cheap. |
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QCOM
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On a roll: FTC case against Qualcomm is thrown out by appeals court
(12 Aug 2020) Just a few weeks ago, Penn New Frontier Fund member Qualcomm (QCOM $109) announced it had struck a deal with Huawei, ending a time-consuming patent dispute and putting $1.8 billion in its pocket. This week the company received more good news: an appeals court overturned the FTC's antitrust ruling against the company. At the heart of the issue was Qualcomm's ability to charge licensing fees to handset makers, a practice the FTC said was anti-competitive. Had the appeals court not struck down the ruling, the company would have been forced to renegotiate licensing deals with hundreds of corporate customers, license its patents to rival chipmakers, and stop asking customers to sign exclusive agreements for its chips. The $123 billion San Diego-based firm would have also had to put up with seven years of FTC monitoring—a legal and monetary nightmare. All of that is swept away with this reversal, allowing the company to remain focused on its goal of dominating the 5G chip market. QCOM shares are up 40% since we purchased for the Penn New Frontier Fund three months ago. |
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QCOM
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Qualcomm spikes 15% after reaching settlement with Huawei
(30 Jul 2020) Shares of Penn New Frontier Fund member Qualcomm (QCOM $45-$107-$96) punched through their 52-week high of $96.17 after the company announced it had reached a settlement with Chinese telecom giant Huawei regarding a patent dispute. CEO Steve Mollenkopf said that the San Diego-based firm would pocket a cool $1.8 billion in Q4 as a result of the agreement. Upgrades came rolling in after the deal was announced, as it clears the way for Qualcomm to maintain its leadership position as the 5G rollout begins picking back up steam following Covid-related delays. The 15% jump in the share price was also helped along by JP Morgan's new price target of $120, and Cowen's $130 (from $115) target. Mollenkopf remains, in our opinion, one of the most adroit CEOs in the industry. His ability to get deals done despite obstacles that would derail lesser CEOs is a major reason the company remains a dominant player and the leading handset chipmaker. We have no plans to sell QCOM at either of those price targets. |
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TSM
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Taiwan Semiconductor to build Arizona chip plant
(15 May 2020) Finally, after decades of complacency, a full strategic review of our unacceptable dependence on communist China for critical goods and materials is taking place. The products in question range from rare earth materials for high-tech equipment to active pharmaceutical ingredients (APIs) for drugs taken by Americans on a daily basis. Square in the middle of this issue sits semiconductor manufacturing. President Trump has made it clear that he wants the most advanced chips in the world to be made, once again, in the United States. Penn Global Leaders Club member Intel (INTC $59) has already green-lighted its own commitment to the project. Now, a second global leader in chip production has made a bold move to further this cause: Taiwan Semiconductor (TSM $52) has announced plans to build a $12 billion manufacturing facility in Arizona. Building the plant, which will employ 1,600, is sure to enrage Beijing, which claims Taiwan as part of its territory. Yet another skirmish in a trade war which is far from over—but one which must be fought. |
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QCOM
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Penn New Frontier member Qualcomm surges after earnings report. (07 Nov 2019) Back on 24 June, when shares of semiconductor company Qualcomm (QCOM $49-$90-$90) were sitting at $72.72, we added it to the Penn New Frontier Fund. In an accompanying article in The Penn Wealth Report on 5G technology, we noted it as one of the "must-buys" in the arena, and the only major US player which builds 5G modems and antennas. After posting solid earnings for its most recent quarter, QCOM shares are trading at $90, and a slew of analyst houses have rushed in to raise their price targets. After reporting a beat on top-line revenues and bottom-line net income, CEO Steve Mollenkkopf—one of our favorite CEOs in the industry—said that "Our technology and inventions leave us extremely well positioned as 5G accelerates in 2020." We agree with that as much now as we did when we recommended the stock back in June. There are so many players claiming to be winners (on the come) of the 5G race, that it can be hard to separate the truth from the hype, which is one reason we wrote our article on the 5G revolution. Qualcomm is the real deal.
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QCOM
AAPL INTC |
Qualcomm soaring after settling battle with Apple and Intel's departure from 5G. (17 Apr 2019) It has been a very good week for chip maker Qualcomm (QCOM $49-$81-$77). First came the announcement that it had settled its long-running legal battle with Apple (AAPL) over patent infringements and royalty payments, with the two coming to an agreement even as the costly court battle raged on. Not only will Apple pay Qualcomm an undisclosed amount in the settlement (it had been withholding a whopping $8 billion due in royalties), the two also forged a new six-year licensing agreement. This was in Apple's best interest, as it needs QCOM's chips as it enters the transformational world of 5G. Then came the announcement, just hours later, that Qualcom's chief rival, Intel (INTC), was leaving the 5G chip business altogether. Our guess is that Tim Cook thought he could count on Intel's nascent 5G business to fill the void, but that the company simply wasn't making the necessary progress in the field. This leaves one company standing as the dominant player in the space. Rightfully so, investors rewarded QCOM stock with a 23% spike on Tuesday and a 13% jump at Wednesday's open. Despite constant pushback from smartphone makers with respect to the royalty payments demanded by Qualcomm for their chip technology, the company is the undisputed worldwide leader in this technology. Our biggest challenge with the stock continues to be its high valuation (QCOM has a 50 P/E ratio as compared to INTC's 14, for example). Investing in semiconductor companies can be a harrowing experience; for evidence of that, just look back to the industry's fourth-quarter drubbing. To take advantage of the industry as a whole—instead of taking a chance on any one player—investors can consider ETFs like the iShares PHLX Semiconductor fund (SOXX) or the VanEck Vectors Semiconductor fund (SMH). QCOM is a top-tier holding within each.
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NVDA
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Nvidia's plunge points to chronic economic problems in China. (28 Jan 2019) The world was living under the fantasy assumption—foisted upon us by the media—that China's economic growth had no end. Investors are now beginning to understand just what a fallacy that argument was, and they are not taking it well. The latest evidence comes from chipmaker Nvidia (NVDA $124-$134-$293), which plunged 17% on Monday morning after warning investors to expect a huge revenue miss—from $2.7 billion guidance to $2.2 billion likely—over the course of this past quarter. Management cited deteriorating economic conditions in China, and a weakening global economy. CEO Jensen Huang called the quarter "extraordinary, unusually turbulent, and disappointing." Nvidia is a leading designer of graphics chips that enhance the experience on computing platforms (think high-end gaming systems).
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TXN
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Texas Instruments gets a beat, while the CEO gets the boot. What is going on in the semiconductor C-suites? First it was Intel's (INTC) visionary CEO Brian Krzanich getting ousted for sexual misconduct, now it is Texas Instruments (TXN $80-$115-$121) CEO Brian Crutcher getting the boot for violating that company's "code of conduct." Crutcher has been CEO for—get ready—one month. There should be very little fallout from this move, as longtime CEO (and current chairman and president) Rich Templeton will move back into his old role. On a bright note for the company, the Q2 earnings report showed a 9% growth in revenues (to $4.02B) and an earnings beat of $1.40 per share versus the $1.32 expected. Despite the good quarter and the muted response to the CEO ouster, we believe TXN is only worth around $100 per share. The Dallas-based company has a market cap of $112 billion and generates 95% of its revenues from chips (the other 5% comes from its iconic calculators).
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INTC
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In shocking development, Intel chief Krzanich is out. (21 Jun 2018) Adding semiconductor juggernaut Intel (INTC $33-$53-$58) to the Penn Global Leaders Club was a relatively easy decision. Not only is the company a worldwide industry leader, CEO Brian Krzanich, who started at the company as a process engineer in the early 1980s, has created a masterful strategic plan for the company's future. That future will now go on without Mr. Krzanich, who was asked to resign his post due to an extramarital affair with a female employee of the firm. Despite the consensual nature of the relationship, it violated the company's non-fraternization policy. We don't anticipate selling our position, but we are placing Intel on the watch list.
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QCOM
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Chipmaker Qualcomm hopes you'll pay for "always-on" laptop technology. (05 Jun 2018) The world's largest wireless chipmaker, San Diego's Qualcomm (QCOM $49-$59-$69) is going after rival Intel (INTC) for a greater share of the PC/laptop market, and it is offering users a unique proposition. One of the main reasons people don't take their MacBook or PC laptop with them on the road is the hassle of having to connect to the internet wherever they are. Qualcomm's new chip, the Snapdragon 850, aims to change that with its "always-on" technology. Just like your smartphone or tablet, Snapdragon will give you continuous internet access—without the need to do anything. Samsung has already committed to a new device based around the chip, and plans on having it ready for sale by the end of the year. This technology is long overdue and will, we believe, help lead to a revitalization of the laptop market. Carriers love the idea because it will give them another monthly stream of income, as users will pay a monthly fee for the connection just as they do for their phones and tablets
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INTC
QCOM AVGO NXPI |
You need a diagram to wrap your head around this potential semiconductor move
(UPDATE: President Trump has taken the advice of CFIUS and denied the Broadcom purchase of Qualcomm on national security grounds, so that tie-up is now out of the equation.) (12 Mar 2018) OK, let's try to paint a picture of this semiconductor showdown: Qualcomm (QCOM) wants to buy NXP Semiconductors (NXPI) for $44 billion. But that deal is on hold, as Broadcom (AVGO) is pushing a hostile takeover of Qualcomm with an offer on the table for $121 billion. But that deal is on hold as the US government reviews the acquisition on national security grounds. But now Intel (INTC) is reportedly considering a bold move to acquire Broadcom before the Qualcomm deal goes through, fearing competition from the combined entity. Whew. The semiconductor industry is on fire, and nothing proves that point more than this merger-mania. Chips will control virtually everything in the uber-connected world we are entering, and expect the big players, like Penn Global Leaders Club member Intel, to aggressively gobble up smaller players. Over the past few years, Intel has picked up chipmakers Altera ($16.7 billion) and Mobileye ($15.3 billion) to remain on the cutting edge of the industry. With Broadcom's $107 billion market cap, this would certainly be their biggest acquisition ever. The company is not commenting on the rumors. |
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INTC
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Penn member Intel jumps 4% after hours following earnings beat, guidance
(25 Jan 2018) Intel (INTC $33-$47-$48) shares were up around 4% after hours on Thursday following the company's Q4 earnings release. Versus the $16.35 billion expected by analysts, quarterly revenue came in hot, at $17.05 billion. Earnings per share also beat: $1.08 per share versus $0.86 expected. Revenue was up 4% for the quarter, and 6% year-over-year. Investors also applauded the rosy guidance issued by the tech giant. For fiscal year 2018, the company projects sales totaling $64 billion to $66 billion. Intel, which should punch through its 52-week high on Friday, is in the Penn Global Leaders Club. |
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UCTT
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Sold Ultra Clean Holdings with 1-month, 20% gain in New Frontier Fund
(22 Jan 2018) We purchased semiconductor equipment maker Ultra Clean Holdings (UCTT $12-$26-$35) precisely one month ago in the New Frontier Fund (see the Trading Desk for purchase details) because we determined, from our fundamental analysis, that this strong company had been ignored by investors. Well, the investment community got wise to UCTT's clean business model, driving the price up 20% in those 20-odd trading days. We still believe adamantly in the company, but with overall market valuations where they are, we took our profits off the table (actually, our stop-limit hit). We had planned to own the company longer, but 1% per day for the holding period was good enough for us. This short-term buy/sell highlights the importance of funding a personal IRA account to the max allowed to avoid the greedy tax collectors in D.C. |
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INTC
AMD NVDA |
Rivals Intel, AMD team up to take on Nvidia
The enemy of my enemy is my friend? Rivals Intel (INTC $33-$47-$47) and AMD (AMD $6-$12-$16) appear ready to join forces—at least in a limited way—to battle joint enemy Nvidia (NVDA $67-$210-$210), which has been gaining market share at a rapid clip. The two chipmakers are poised to announce a new laptop chip that will combine an Intel processor with an AMD graphics unit designed for thin devices with lightning speed—the kind of speed you need to run advanced video games. NVDA has eaten into Intel's AI unit and AMD's graphics chips. The two have good reason to find Nvidia the larger threat than one another. |
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AVGO
QCOM |
Broadcom to make unsolicited bid to buy Qualcomm for $100+ billion
(06 Nov 2017) Diversified technology solutions company Broadcom (AVGO $160-$274-$278) had a busy news week. First, CEO Hock Tan was with the president in the Oval Office announcing that his $111-billion company was moving its headquarters from Singapore to the United States, then the company announced it was going after Qualcomm (QCOM $49-$62-$70) in a $100+ billion takeover deal. Read more about the deal in this coming Sunday's Penn Wealth Report. |
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QCOM
INTC AAPL |
Qualcomm drops on speculation Apple might drop them
(31 Oct 2017) Apple and Qualcomm (QCOM $49-$51-$70) have a long relationship, with the semiconductor firm supplying chips for every iPhone to date. Rumors are getting stronger that Apple may be ready to sever ties and move en masse to Penn member Intel's (INTC $33-$46-$46) products. QCOM ticked off Apple by withholding some software from the iPhone maker that is critical to testing the chips. Intel is up 27% since we added it to the Penn Global Leaders Club this past March. |
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DIOD
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Taking our one-month, double-digit profit on semiconductor firm Diodes
(12 Oct 2017) Last month we added application-specific semiconductor maker Diodes (DIOD $20-$32-$32) to the Penn Intrepid Trading Platform as a pure momentum play. The stock was already on a tear, so we jumped on to ride the comet higher. Sure enough, the company hit our target price, so we took the 11% short-term gain. Closed position at $31.88. Will it go higher? Maybe. But never let greed stand in the way of taking a profit when your target is achieved. |
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NVDA
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Nvidia claims to have created a computer system which allows for completely autonomous driving
(10 Oct 2017) Level 5. It's the holy grail of autonomous driving. At this level, a vehicle can completely control all aspects of the driving experience, with no need for human input. Chipmaker Nvidia (NVDA $64-$185-$191) has just unveiled a new computer system which it claims will give vehicles this full autonomy. Coming in a package about "the size of a license plate," the company said the new system, codenamed Pegasus, will be available in 2018, and will represent a tenfold increase over currently-available technology. The company also announced it would partner with an auto supplier to produce a line of fully autonomous delivery vehicles for DHL. |
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MU
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Shares of chipmaker Micron Technology jump 6% after earnings beat
(27 Sep 2017) Micron Technology (MU $16-$37-$37) shares were up around 8% at the open on Wednesday after the chipmaker beat fiscal Q4 estimates. The company reported quarterly net income of $2.37 billion, versus a loss of $170 million last year, and a quite remarkable revenue spike to $6.14 billion, from $3.22 billion in the same quarter of 2016. After the earnings beat, Wells Fargo raised its price target on the firm’s shares from $40 to $45. Boise-based Micron makes a number of semiconductor devices, including DRAM (dynamic random-access memory), flash memory, and solid-state drives. |
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AMD
TSLA NVDA INTC |
Tesla working with AMD to develop its own AI chip for vehicles
(20 Sep 2017) Chipmaker AMD (AMD $6-$14-$16) rallied nearly 5% on Wednesday after it was uncovered that the company was working on an artificial intelligence chip with electric carmaker Tesla ($178-$374-$390). Tesla has shown a strong desire to vertically integrate, e.g. its electric battery gigafactory in Nevada, relying less on third-party suppliers, so performing direct work on a chip for its autonomous vehicles makes sense. This could spell trouble for chip rival Nvidia (NVDA $63-$186-$187), however, as it has been a major supplier of graphics processors for Tesla. Notably, the carmaker is not working at all with semiconductor giant Intel, which has been supplying Google with chips for its own autonomous vehicle. Tesla currently has about 50 engineers and workers assigned to the AMD project. |
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QCOM
AAPL XSD |
(20 Jul 2017) Qualcomm's ongoing legal dispute with Apple is only hurting one company.
Perhaps Qualcomm's (QCOM) legal team didn't consider this fact before they decided to tangle with Apple (AAPL): the latter has more cash on hand than any other company in the world, and can simply wait out any legal battle (which will ultimately turn out in their favor anyway). The lawsuit, which Apple actually initiated, is weighing on investors' minds as they digest QCOM's latest earnings, which show a beat on revenue but a disappointing forecast for the remainder of the year. Shares were off 5% in early trading, and are down 16% year-to-date—while the semiconductor benchmark ETF (XSD) is up 18.25% in 2017. AAPL is up 30% YTD. |
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NVDA
INTC |
(12 Jul 2017) NVIDIA appears to be in the driver's seat, gets upgrade at SunTrust
While we still believe in beleaguered chipmaker Intel (INTC), 3D graphics and chipmaker NVIDIA (NVDA) is currently the darling of Wall Street. The $93 billion company's focus on artificial intelligence and high-end gaming just earned it another upgrade: SunTrust placed a "BUY" recommendation on the shares, with a target price of $177 (currently trading for $159 with a P/E of 52). The analyst cited NVDA's success in breaking into the massive data center (think "the cloud") and autonomous vehicle markets as drivers of future growth. |
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IOTS
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Stock of the Day (24 May 2017) Adesto Technologies Corp. If Adesto Technologies Corp. (IOTS $2-$5-$6) has their way, their company's name will become synonymous with the burgeoning "Internet of Things." If you doubt the commitment to that premise, just look at their stock symbol. The Santa Clara, California-based company makes ultra-low power memory products for all of the mundane "things" in your life which will soon be brought to life and "connected," from your coffee maker to your sprinkler system to the lightbulbs running throughout your home. To better understand what the company does, consider this example: If you have a "smart" device at the front of your house, like the "Ring" doorbell, you probably love it but hate the frequency with which you must recharge the unit. Adesto's ultra-low power memory components offer ever-increasing capabilities but use virtually no power. Now, take that Ring doorbell times the thousands of items which will soon be "connected," and you begin to understand the growth potential of companies in this space. Yes, there is fierce competition coming. But we believe Adesto could become, if nothing else, a takeover target. (This is not a solicitation or recommendation to buy IOTS. Always consult your investment professional before buying shares of this or any other company.)
(Photo: Courtesy Adesto Technologies) |
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AMAT
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(15 May 2017) Perennial Penn favorite Applied Materials tops on both revenue and profits. Chip equipment maker and regular Penn strategies stock Applied Materials (AMAT $20-$44-$45) was rising after hours following reports of a fiscal Q2 beat on both the top and bottom lines. The California-based company reported sales of $3.55 billion (up 45% from last year) and earnings of 79 cents per share—a 132% increase from Q2 of 2016. CEO Gary Dickerson said the company has "tremendous momentum" going forward.
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AMD
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(01 May 2017) AMD falling over 6% after hours. Chipmaker AMD (AMD $3-$13-16) has turned a profit twice in the last in the last ten quarters. While we believe they can shake off the cobwebs with their new high-performance line of gaming chips, it has yet to pan out. The stock is down more than 6% after hours following the release of its Q1 earnings report. On just shy of $1 billion in revenue, the company lost $0.07 per share over the course of the quarter.
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AAPL
IGNMF CRUS SWKS JBL AVGO |
(03 Apr 2017) Dramatic plunge in Apple supplier's share price should be warning to investors. Who could go wrong investing in a flush semiconductor company—especially one which supplies Apple with hardware—right? Wrong. While this is one of our favorite growth industries, investors need to have an in-depth understanding before jumping in.
Take the UK-based Imagination Technologies Group, PLC (IGNMF $1.20-$1.38-$3.63). The company makes mobile graphics processors and other microprocessors for Apple (AAPL $89-$144-$145). The contracts with Apple have been so lucrative, in fact, that the company began focusing nearly all its resources on this one customer. For its part, Apple even bought 10% of the firm. Then the unthinkable happened: Apple informed Imagination that it would no longer be using its intellectual property or products. Almost instantly, the floor fell out beneath the company's shares, dropping 69% in a matter of minutes. Yes, IGNMF has a market cap of around just $400 million (actually, about $150 million after the bloodbath), but there are some pretty major players with huge exposure to Apple, and the company's whims: Cirrus Logic (CRUS), 66%; Skyworks (SWKS), 40%; Jabil Circuit (JBL), 25%; Broadcom (AVGO), 20%. When an event like this happens, a stop loss isn't going to do you any good—the damage is done before the sale is triggered. Therefore, you must perform due diligence and understand, as much as possible, what the unsystematic risks are to each investment. |
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INTC
MBLY TSLA |
In big bet on autonomous auto industry, Intel buys Mobileye for $15.3 billion
(2017.03.17) Semiconductor giant Intel (INTC $30-$36-$38) has announced that it will buy Israeli-based Mobileye (MBLY $33-$61-$51) for $15.3 billion in cash. Intel, one of the oldest tech firms in Silicon Valley, has faced heat lately for being too conservative with its strategic planning, and for relying too heavily on its mature, slow-growing PC market to generate new chip orders. This is a clear indication that the firm, founded in 1968 by two semiconductor pioneers, is indeed embracing emerging technologies, and that it plans to compete in these new arenas. Mobileye was launched in 1999 as a cutting-edge auto technology company. With a team of over 450 engineers, the firm focuses on the foundational software for autonomous (self-driving) vehicles. From sensing all of the external stimuli, to mapping out the path, to actually controlling the navigation of the vehicle, Mobileye is an industry leader. Mobileye has partnered with 25 different automakers and suppliers, including the likes of BMW and Delphi. The company made news recently, however, for a broken partnership with electric car manufacturer Tesla (TSLA $178-$246-$287). That relationship came to an abrupt halt following the high-profile car crash last May that left the “driver” dead. Mobileye said the company would no longer provide its chips to Tesla due to disagreements over how the technology was deployed. From Intel’s perspective, the acquisition is part of CEO Brian Krznich’s plan to develop a consistent, common platform for autonomous vehicles. This will be a critical component when it comes to selling the idea to leery municipalities and states. Despite questionable acquisitions in the past, we like this move a lot. Members, take a look at action taken within the Penn portfolios by going to the Trading Desk. (Reprinted from The Penn Wealth Report, Vol. 5, Issue 2) |
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AMD
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(27 Feb 2017) Chipmaker AMD hits nine-year high. Shares of AMD (AMD $2-$15-$15) have come a long way from the $2 they traded at in February of last year—the company just punched through its 52-week high to reach a price level its shares haven't seen since before the Great Recession. Investors are excited by the prospects for the company's next-gen processor line known as Ryzen, which will be used for high-performance desktop and gaming PCs. Still, we believe Intel is the better bet, which is why we hold that stock in the Global Leaders Club.
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INTC
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(09 Feb 2017) Intel announces $7 billion investment in the US. Standing in the Oval Office of the White House, Intel (INTC $28-$36-$38) CEO Brian Krzanich announced on Wednesday that the company plans to invest $7 billion in an advanced new manufacturing facility in Arizona. The plant, which will create 3,000 full-time positions, will produce high-tech semiconductor chips used in emerging technologies, including 5th generation (5G, think "Internet of Things") networks and drones. What do we think of Intel as a semiconductor holding? See this Sunday's Penn Wealth Report.
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