Barclays released its earnings preview for the December quarter and outlook notes for 2023 on Monday. This was particularly bullish for semiconductor stocks of Qualcomm (QCOM), Advanced Micro Devices (AMD) and Nvidia (NVDA). Broadly speaking, analysts like data centers, personal computers, and handsets. End markets for industrial/automotive, analog chips, and semiconductor capital equipment continue to be negative. Despite its more positive outlook, Barclays was quick to point out that its quarterly estimates were below consensus by nearly every name in its coverage universe, “even in the absence of a macro recession.” This means that we see a fair amount of conservatism in terms of upward revisions. For a review of the various sub-industries under the broader semiconductor umbrella, see our industry guide. More specifically, the analyst raised his price target on Nvidia significantly from $170 to $250 a share, while repeating his overweight (buy) rating. They raised both AMD and Qualcomm stocks from equal weight to overweight (hold to buy), with price targets from $70 to $85 and $120 to $150, respectively. All three of his stocks, which took a nasty market hit last year, surged more than 6% to 8% in Monday’s trading session. Those gains added to an already stellar 2023 performance as investors broadly scooped up beaten tech stocks to ring in the new year. The Nasdaq, where many tech stocks trade, is up nearly 9% from where it left off in 2022. Industry capex expectations. Analysts expect capital spending to accelerate in the second half of 2023, both in the US and “potentially in China.” Unique to AMD, analysts have called for aggressive investments in artificial intelligence at Meta Platforms (META), which is also the club’s holding. They said AMD’s low share of meta spending should increase “into 2H23 when META spending re-accelerates” on the back of chipmaker Genoa and Bergamo architectures. AMD Performance YTD Analysts that benefit both AMD and NVDA named generative AI such as ChatGPT. Created by OpenAI, ChapGPT, they said, “looks like it ended up being an AI workload with real applications.” Barclays is reluctant to model the ultimate opportunity, but believes ChapGPT will support upgrades to data centers that “handle higher power requirements.” AMD is set to release its MI300 CPU+GPU chip in the second half of 2023, while Nvidia’s Grace Hopper Superchip is also a CPU+GPU product and is expected to be released at some point in the first half of this year. Analysts backing believe the PC inventory glut should bottom out this quarter. In computer terms, CPU stands for Central Processing Unit and GPU stands for Graphics Processing Unit. Qualcomm With Qualcomm strong in handset chips, Barclays believes the high frequency market will improve in 2023. It could be a buying opportunity as it indicates a potential bottom and a reset of expectations. QCOM Year-to-Date Mountains Qualcomm (QCOM) Year-to-Date Performance One of the key drivers of the end market improvement was that China headwinds turned into tailwinds in the second half. Analysts support Qualcomm’s clear leadership in high-end smartphones, which they believe will help shield Qualcomm from price wars. They said, “Samsung has considerable challenges to return to the high-end technically compared to QCOM, [they] We believe there is still some risk in Apple’s efforts next year. Analysts continue to see Qualcomm’s efforts in the automotive business, most recently valued at $30 billion in a large and rapidly growing pipeline. Line sees exposure to the Internet of Things (IoT) as a long-term growth driver despite short-term headwinds. Consider Barclays’ view: Clearly, we’d love to see an improvement in the end markets that would suggest a bottoming out for semiconductor stocks, but that there’s still a lot of uncertainty on the macroeconomic front. We are not entirely out of the woods given the No. We tend to run the rest of the chipmaker positions following all the recent market adjustments. Was it right to sell those shares? Yes, no. All three stocks sold stocks both above and below current levels. That’s why you never make a quick move to buy or sell an entire position in one fell swoop, as the operating environment can change very quickly and the direction of a stock can change even faster. Do you regret your recent sale? No, for three reasons. First, hindsight is his 20/20 and the best an investor can hope to do is use the data they have at the time to make the best decision. Second, we recently chose to reduce our exposure due to concerns that future earnings results could be significantly below expectations. We continue to hold that view and note again that much of the Barclays analyst’s optimism is based on his outlook for the second half of 2023. Third, the sale of shares provided us with the cash we needed to take positions we believe were set for the first half of the year in names such as Emerson Electric (EMR) and Caterpillar (CAT). rice field. Ultimately, it comes down to managing exposure to short-term headwinds while paying attention to the long-term and the fact that these semi-finished products remain great companies with important growth drivers. Knowing exactly when inventory spikes or runs out is nearly impossible to do consistently. Instead, we prefer to hold core stocks for the long term while increasing or decreasing exposure in line with our near-term outlook. (Jim Cramer’s Charitable Trust is long in QCOM, AMD, NVDA, EMR, and CAT. See full list of shares here.) As a member of Jim Cramer’s CNBC Investing Club, Jim Receive trade alerts before you place a trade. trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charitable trust portfolio. 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The Nvidia Corporation logo is seen at the annual Computex Computer Show in Taipei, Taiwan on May 30, 2017.
Tyrone Siu | Reuters
Barclays released a preview of its earnings for the December quarter and a note on its outlook for 2023 on Monday. Qualcomm (QCOM), Advanced Micro Devices (AMD) and NVIDIA (NVDA).
