Qualcomm, AMD get a boost from HSBC, but the Club remains cautious on chip stocks

Published Mon, Oct 24 20222:50 PM EDT

Semiconductor stocks have been beaten down this year, but HSBC still sees some upside for Club holdings Qualcomm (QCOM) and Advanced Micro Devices (AMD). We're still holding limited shares of the chipmakers on a similar rationale, but remain cautious of semiconductor stocks amid new U.S. export controls blocking chips to China and broader demand weakness for consumer electronics. Analysts at HSBC on Monday initiated coverage on Qualcomm, with a buy rating and $180 price target. The bank also began coverage of AMD, with a hold rating and price target of $60. Shares of Qualcomm were down 0.23%, at $115.47 a share, while shares of AMD were down more than 1%, at $58.18 a share, in midday trading. The semiconductor industry as a whole is down more than 40% year-to-date. HSBC's take Qualcomm is known for making chips used in smartphones, a market under pressure. But HSBC said the company has set itself up for success beyond mobile devices. The analysts argued Qualcomm is well-positioned for growth because of its diversified revenue streams, aided by its automotive and internet of things pipelines — a view the Club shares. "The company is well-positioned for growth in a post-smartphone world thanks to its dominant position in supplying chips to autos, its technology strength in radio frequency front end chips, and its penetration of Internet of Things devices," the analysts wrote a research note. Meanwhile, in a separate note, HSBC said it expects continued market share gains for AMD, even as it remains aware of uncertainty in PC demand that could continue to weigh on earnings. Notable, too, is that HSBC also initiated coverage on AMD competitor Intel (INTC) with a reduce rating, equivalent to sell, underscoring gains made by AMD at Intel's expense. The Club take The semiconductor industry is widely seen as an essential component of the global economy. At the Club, we've been responding to chip industry pressures by recently reducing our exposure, selling shares of Qualcomm , AMD and Marvell Technology (MRVL). This doesn't mean we're abandoning chips altogether. We still own shares in all three, as well as Nvidia (NVDA). And we agree with HSBC that semiconductor firms like Qualcomm and AMD have competent management teams and leading technology portfolios. But, for the moment, the macro picture — including the rising tensions between Washington and Beijing and inventory oversupply — have prompted us to limit our chip stocks. Earlier this month , we downgraded the ratings of our four semiconductor holdings to a 2. The broader takeaway for Club members is that you can love every aspect of a company but if the macroeconomic backdrop is not supportive, or working against the company's ability to grow, you should be as objective as possible and temper expectations. (Jim Cramer's Charitable Trust is long AMD, QCOM, MRVL, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Chair Maria Cantwell , D-Wash., holds semiconductor chips while talking with Pat Gelsinger, CEO of Intel Corporation, before a Senate Commerce, Science, and Transportation hearing on Wednesday, March 23, 2022. Goldman Sachs Asset Management has suggested that between $40 and $50 billion of investment will be needed for the U.S. semiconductor industry to catch up to global peers.

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