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At a time when many investors seem euphoric, others are warning that stock valuations have once again turned frothy. It may pay to take a look back at valuation and performance and consider your own risk tolerance.
A value-based approach that offers lower volatility and good long-term returns can be expected to be less flashy than one focused on the hottest technology stocks. But depending on how much it bothers you when the stock market gyrates, it may be a better way for you to invest. Lower volatility might help you to avoid the type of emotional reaction that can lead to selling into a declining market or attempting to time the market, both of which tend to be losing strategies.
Aaron Dunn is a co-head of the value equity team at Eaton Vance, which is based in Boston and is a unit of Morgan Stanley. During an interview, he explained how he and Brad Galko, who co-heads the team, select stocks for the Eaton Vance Focused Value Opportunities Fund. The fund’s performance benchmark is the Russell 1000 Value Index
RLV,
First, let’s take a broad look at how aggregate forward price-to-earnings ratios have moved for exchange-traded funds tracking several broad indexes over the past 10 years:
The valuations are lower than their 2020 peaks. But for all but one, the valuations still appear to be high when compared with their 10-year averages:
| ETF | Ticker | Current forward P/E | 10-year average forward P/E | Current valuation to 10-year average |
| SPDR S&P 500 ETF Trust |
SPY, |
19.06 | 15.93 | 120% |
| iShares Russell 1000 ETF |
IWB, |
18.94 | 16.02 | 118% |
| iShares Russell 1000 Value ETF |
IWD, |
14.33 | 13.94 | 103% |
| iShares Russell 1000 Growth ETF |
IWF, |
26.63 | 19.00 | 140% |
| Source: FactSet | ||||
All of the listed ETFs listed here are trading well above their 10-year average P/E valuations except the iShares Russell 1000 Value ETF, which is only slightly higher. These numbers back the notion that the broad market is expensive and that a value approach may be more reasonable. It is also worth keeping in mind that during 2022, when the SPDR S&P 500 ETF Trust
SPY,
declined 18.2% and the iShares Russell 1000 ETF
IWB,
fell 19.2%, the iShares Russell 1000 Value ETF
IWD,
pulled back 7.7% and the Eaton Vance Focused Value Opportunity Fund’s Class I shares were down only 3.3%, all with dividends reinvested.
If we look at 10-year total returns, the nonvalue indexes, so heavily weighted to the largest technology-oriented companies, have been excellent performers for investors who could remain committed through thick and thin:
| Fund | Ticker | 3-year average annual return | 5-year average annual return | 10-year average annual return |
| SPDR S&P 500 ETF Trust |
SPY, |
13.2% | 11.4% | 12.3% |
| iShares Russell 1000 ETF |
IWB, |
12.5% | 11.0% | 12.1% |
| iShares Russell 1000 Growth ETF |
IWF, |
11.2% | 14.0% | 15.0% |
| iShares Russell 1000 Value ETF |
IWD, |
13.7% | 7.3% | 8.7% |
| Eaton Vance Value Opportunities Fund – Class I |
EIFVX, |
14.8% | 8.7% | 9.7% |
| Source: FactSet | ||||
For five and 10 years, the growth-oriented approaches have shined. But for three years, which includes the 2022 disruption, the Eaton Vance Value Opportunities Fund has fared best, even outperforming its benchmark.
The Eaton Vance Focused Value Opportunity Fund’s Class I
EIFVX,
shares are rated four stars (out of five) within Morningstar’s Large Value fund category. The fund’s Class A
EAFVX,
shares are rated three stars. The difference is that the Class I shares, which are typically distributed through investment advisers, have annual expenses of 0.74% of assets under management, while the Class A shares have an expense ratio of 0.99%. You can purchase Class I shares directly through brokerage platforms for a $50 fee.
Dunn said that when selecting stocks for the fund, he and Galko take a bottom-up approach to identify quality companies. The want to see high returns on invested capital (ROIC) over the long term, as well as a “good competitive position” for a company and a strong management team.
They also prefer companies with low debt. “We do not want to buy overlevered companies and be in a situation where we are diluting through equity raises and putting capital at risk,” he said.
Dunn added that he and Galko look closely at free cash flow generation. A company’s free cash flow is its remaining cash flow after capital expenditures. This is money that can be used to fund expansion, acquisitions, dividend increases or share buybacks, or for other corporate purposes.
“Philosophically, what this results in is that we hold up well in markets such as last year’s. And we find upside in stocks trading below intrinsic value,” he said.
“We focus on finding ideas where there is a good skew for upside relative to downside,” he added.
According to Morningstar, the fund’s active share when compared with IWD is high, at 91.45%. Active share is a measure of how much an actively managed fund differs in investment exposure from its benchmark index. If you are paying more for active management than you would to invest in an index fund, active share is something to consider. If it is low, you might be overpaying for a “closet indexer.” You can read about how Morningstar assesses active shares here.
The fund is concentrated, typically holding between 25 and 45 companies.
According to Morningstar’s most recent data, these were the fund’s top 10 holdings (out of 28 stocks) as of May 31:
| Company | Ticker | % of Eaton Vance Focused Value Opportunity Fund | Forward P/E | 2023 total return |
| Alphabet Inc. Class A |
GOOGL, |
5.0% | 19.6 | 32% |
| Micron Technology Inc. |
MU, |
4.8% | N/A | 25% |
| American International Group Inc. |
AIG, |
4.3% | 8.1 | -7% |
| Reinsurance Group of America Inc. |
RGA, |
4.2% | 8.0 | 1% |
| Bristol Myers Squibb Co. |
BMY, |
4.1% | 7.7 | -11% |
| Wells Fargo & Co. |
WFC, |
4.0% | 8.9 | 4% |
| ConocoPhillips |
COP, |
4.0% | 10.5 | -10% |
| Constellation Brands Inc. Class A |
STZ, |
3.9% | 20.4 | 9% |
| NextEra Energy Inc. |
NEE, |
3.8% | 21.9 | -13% |
| Charles Schwab Corp. |
SCHW, |
3.8% | 16.0 | -30% |
| Source: FactSet | ||||
Click the tickers for more about each company, fund or index.
There is no forward price-to-earnings ratio for Micron Technology Inc.
MU,
because the company’s combined EPS for the next 12 months are expected to be negative.
Micron is a company in transition, caught up in diplomatic conflict between the U.S. and China, whose government directed some manufacturers in May to stop purchasing memory chips made by the company. Then again, in June, Micron highlighted its “commitment to China” when announcing a new investment in its plant in Xi’an.
Read: Micron recovery debated by analysts as bottom is called in memory-chip market
Dunn said downside for Micron’s stock was “mitigated” because of the company’s relatively low debt. He also said that as companies continue to adopt more cloud services and deploy artificial-intelligence technology, demand for memory chips will increase.
While there is no current forward P/E for Micron, the stock always trades at low valuations relative to most other large tech companies. Dunn touted Micron’s strong cash flow and said the stock was “underappreciated” and remained “an interesting play on cloud and AI.”
While it is not among the top 10 holdings listed above, Dunn highlighted Dollar Tree Inc.
DLTR,
as an example of the type of value stock he favors. The company “was not well run” following its acquisition of Family Dollar in 2015. But he has been impressed with its more recent turnaround efforts, including improvements in how products are shipped to stores, better efficiency and “a lot of work going on with culture, how they operate, how they treat employees [and] adding some shelf space to move more product.”
It is interesting to see NextEra Energy Inc.
NEE,
among the fund’s largest holdings. This has been quite a strong grower over the past 10 years, with a total return of 346% as the owner of Florida Power & Light has grown along with its customer base and has become a leader in the build-out of solar-power generation.
Dunn said the company is “still growing in the mid-single digits. For a utility company, that is a strong profile.”
When discussing Alphabet Inc.
GOOGL,
the fund’s largest holding as of May 31, Dunn said that “it is really an advertising business with other businesses around it” and that its P/E valuation was “not extremely taxing.” He said Alphabet had been “less aggressive with cost cutting” than other technology giants and added that the company’s “targeted search” through Google and other properties, such as YouTube, “probably provides a better return on investment than broadcast advertising, and that really is the key.”
Don’t miss: This stock investing strategy has blown away the S&P 500. Here’s a way to refine it for quality.
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Beijing/Hong Kong
CNN
—
The world is big enough for both the United States and China to thrive, US Treasury Secretary Janet Yellen said Sunday as she wrapped up a visit to Beijing aimed at stablizing the relationship between the world’s two largest economies.
Yellen said she had “direct, substantive, and productive” talks with China’s new economic leadership, including Premier Li Qiang and Pan Gongsheng, the newly appointed Communist Party chief of China’s central bank.
“No one visit will solve our challenges overnight. But I expect that this trip will help build a resilient and productive channel of communication,” Yellen told a news conference in Beijing.
“Broadly speaking, I believe that my bilateral meetings — which totaled about 10 hours over two days — served as a step forward in our effort to put the US-China relationship on surer footing.”
Yellen’s trip marked the second visit by a US cabinet official to the Chinese capital in a matter of weeks as Washington seeks to steer relations with Beijing back on course after months of inflamed tensions.
In recent months, while pushing to resume high-level diplomatic talks, the US has imposed sanctions on Chinese companies, successfully pushed allies in Japan and the Netherlands to restrict sales of advanced semiconductors to China and rallied other advanced economies to counter Beijing’s “economic coercion.”
But Yellen reiterated that the United States is not seeking to decouple from China, which she said would be “disastrous for both countries and destabilizing for the world” and “virtually impossible to undertake.”
“There is an important distinction between decoupling, on the one hand, and on the other hand, diversifying critical supply chains or taking targeted national security actions,” she said.
She said the United States would continue to take “targeted actions” to protect its own national security interests and those of its allies, while making sure these actions are “transparent, narrowly scoped and targeted to clear objectives.”
Following Yellen’s meeting with China’s Vice Premier He Lifeng Saturday, a report from the official Xinhua news agency appeared to suggest the Chinese side took issue with this approach.
“China believes that generalizing national security is not conducive to normal economic and trade exchanges,” it said. “The Chinese side has expressed concerns about US sanctions and restrictive measures against China.”
Yellen said the US and China have “significant disagreements” that need to be communicated “clearly and directly,” but noted that the Biden administration does not see US-China relations “through the frame of great power conflict.”
“We believe that the world is big enough for both of our countries to thrive. Both nations have an obligation to responsibly manage this relationship: to find a way to live together and share in global prosperity,” she said.
Yellen said she pressed Chinese officials on Washington’s “serious concerns about China’s unfair economic practices” — including barriers to market access for foreign firms and issues involving intellectual property — and “worries about a recent uptick in coercive actions against American firms.”
Beijing’s updated counter-espionage law and crackdown against Western consulting and due diligence firms have unnerved US businesses.
Over the past months, Chinese authorities have questioned staff at the Shanghai office of US consultancy Bain & Company, and closed the Beijing office of Mintz Group, an American corporate due diligence firm, while detaining five of its local staff.
Yellen said no final decision has been made to limit outbound investments by US companies in China, when asked about potential upcoming foreign investment curbs that might be implemented by Washington.
“I was able to explain to my Chinese counterparts that if we do implement such restrictions, that we will do so in a transparent way,” she said, adding any new curbs or sanctions would “be highly targeted and clearly directed narrowly at a few sectors where we have specific national security concerns.”
“I want to allay their fears that we would do something that would have broad-based impacts on the Chinese economy. That’s not the case. That’s not the intention,” she said.
The Biden administration is preparing new rules that could restrict US investment in certain sectors in China, according to multiple media reports including from the The Wall Street Journal and Politico.
Yellen said she discussed with Chinese officials areas of cooperation on global challenges, including working together to mobilize multilateral financing for climate action. US climate envoy John Kerry is expected to visit China next, according to US Ambassador to China Nicholas Burns, though he did not provide a timetable for the trip.
Yellen said she also raised “the importance of ending Russia’s brutal and illegal war against Ukraine,” and said it was “essential” that Chinese firms avoid providing Russia with material support for the war or in evading sanctions.
Yellen’s trip came just days after China retaliated in a tech war with the US by announcing restrictions on exports of two strategic materials needed to make semiconductors.
The move was widely seen as a response to the Biden administration’s ban on advanced chip sales to China, which was announced last October. According to multiple media reports, the curbs will be expanded to restrict the sale of some artificial intelligence chips.
The sanctions strike at the heart of Beijing’s tech ambitions, as chips are vital for everything from smartphones, self-driving cars, and advanced computing to weapons manufacturing.
Jake Werner, an East Asia Research fellow at the Quincy Institute in Washington, said it was unlikely Yellen’s Chinese counterparts would be persuaded by her argument that the US ban is not meant to stifle China’s economy.
“US and Chinese leaders alike consider these technologies foundational to the future of growth. Chinese leaders see the restrictions as an attempt to permanently subordinate China to US power and to coercively exclude Chinese business from the most important industries of the future,” Werner said.
“This issue will continue to be one of the most poisonous areas of contention within the relationship.”
A former Chinese official has indicated that further retaliatory measures may be on the cards.
Even as both Beijing and Washington indicate high-level discussions will continue, the thorniest aspect of bilateral ties — particularly the tussle over access to advanced technology — may fuel more tension in the relationship.
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The goal of many (or most) savers and long-term investors is to achieve financial independence. The combination of building up a nest egg, paying down debt and eventually receiving Social Security payments or another source of retirement income might put you in a comfortable position, but even people who have worked together to achieve financial independence may disagree on what to do after their careers end.
Quentin Fottrell — the Moneyist — heard from one couple who are facing a quandary. They have been financially responsible, but as they near retirement, the wife wishes to be very careful with their combined investment portfolio, while the husband wants to begin spending a significant portion of it. They both make reasonable arguments. Here’s what they should do.
From the Help Me Retire column: My 57-year-old husband works three shifts and is burned out. Can he retire?
Getty Images
Doing this even once might help encourage you or someone you know to begin saving and investing for the long term.
Getty Images
Even an index that includes hundreds of stocks can be heavily concentrated. Large technology-oriented companies have led this year’s 16% rebound for the S&P 500
SPX,
following last year’s 18% decline (both with dividends reinvested). But the index is weighted by market capitalization, which means the “Magnificent Seven” — Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
two common share classes of Alphabet Inc.
GOOGL,
GOOG,
Amazon.com Inc.
AMZN,
Nvidia Corp.
NVDA,
Tesla Inc.
TSLA,
and Meta Platforms Inc.
META,
— make up 27.9% of the SPDR S&P 500 ETF Trust
SPY,
In the Need to Know column, Barbara Kollmeyer lists companies that might turn out to be among the next Magnificent Seven, based on a Goldman Sachs screen.
Getting back to the current Magnificent Seven, you may be surprised to see which of the stocks is cheapest — by far — per one commonly used valuation metric.
Rivian
There has been a lot of news in the electric-vehicle space this week. Here are lists of coverage organized by topic.
Rising unit sales among EV makers:
Legacy automakers report sales increases, including a tremendous increase in EV unit sales for Ford
F,
:
Reaction from analysts and investors:
In other news, Mullen Automotive Inc.
MULN,
has started to deliver electric vehicles. Further developments for the company this week included the announcement of a stock-buyback plan and possible action against naked short sellers.
The employment numbers for June from the U.S. Bureau of Labor Statistics showed the lowest level of job creation since late 2020. Then again, the demand for labor in the U.S. remains high, despite the Federal Reserve’s efforts to slow economic growth.
If you are looking to make a career change, what does all this mean to you? Andrew Keshner points to a development in the employment market that may have you thinking twice about jumping ship.
AFP via Getty Images
Meta rolled out its new Threads service on Wednesday to compete directly with Twitter and has already signed up 50 million users, according to some reports.
Twitter CEO Linda Yaccarino was quick to respond.
More reaction:
U.S. shoppers have been taking it slow during a period of high inflation, but the overall economy has been stronger than expected even as the Federal Reserve continues tightening its monetary policy.
The coming flurry of July sales events at Amazon, Walmart Inc.
WMT,
and Target Corp.
TGT,
could signal a turnaround for consumers, as James Rogers reports.
Lukas I. Alpert writes the Financial Crime column. Have you ever wondered how you might steal a lot of cash from a company that is likely to have rather tight accounting controls in place? This week Alpert explains how the manager of an Amazon warehouse managed to scale the heights of criminal achievement to collect $10 million — and a 16-year jail sentence.
Also read: Silver dealer ordered to pay $146 million in case of 500,000 missing coins
Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.
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Technology stocks reigned supreme in the first half of the year, far outperforming the wider market. But sustaining that rally will be tough, and investors need to look now for tech stocks that are ready to benefit from the growth of artificial intelligence.
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Micron Technology Inc. could be approaching a big new semiconductor cycle as it predicts a huge boost from artificial intelligence, but there could be a roadblock in the path.
Micron
MU,
reported a third-quarter loss and a 57% drop in revenue Wednesday, after the chip industry’s oversupply hit the memory-chip maker hard. On the bright side, Micron Chief Executive Sanjay Mehrotra said he believed the memory industry “had passed its trough” and that the company’s margins should improve as the supply-demand balance is gradually restored.
Another big issue for the stock right now, though, is China’s decision to recommend that “operators of critical information infrastructure in China should stop purchasing Micron products.” Mehrotra told analysts on the company’s conference call that the decision will impact about 50% of its products sold in China.
“We currently estimate that approximately half of that China-headquartered customer revenue, which equates to a low double-digit percentage of Micron’s worldwide revenue, is at risk of being impacted,” Mehrotra said on the call. “This significant headwind is impacting our outlook and slowing our recovery.”
More from Therese: AI has given a big boost to stock of this lesser-known Silicon Valley computer maker
He said Micron will work with its long-term customers who are not impacted by China’s decision, and hopefully will increase its share with those customers.
On the plus side, Micron expects to see a substantial boost to its memory business as a result of companies gearing up to run generative AI on their own servers or clouds. “Generative AI [is] becoming a big opportunity and we look at it for 2024 as a big year for AI and for memory and storage, and Micron will be well-positioned,” in the data center with its products, Mehrotra said. He added that it is “very, very early innings for AI,” which is really pervasive. “It’s everywhere.”
Full earnings coverage: Micron CEO calls bottom in memory-chip market, but weak PC, smartphone forecasts cut into expected AI gains
He said it will be in both cloud and enterprise server applications, and due to confidentiality of data, enterprises will be building their own large language models, adding that the DRAM (dynamic random access memory) content required for AI in servers is driving higher demand for memory and storage in servers. In super cluster configurations, for example, the DRAM content can be as much as 100 times higher.
Investors appeared to maintain some caution about when the AI impact will kick in, even as some analysts have forecast that AI demand will lead to a general supercycle for many hardware companies. Micron’s shares see-sawed in after-hours trading Wednesday, ending the extended session up about 3%.
See also: Will generative AI complete the cloud transition? One prominent executive thinks so.
In a note ahead of the company’s earnings, Raymond James analyst Srini Pajjuri said that the impact from China “should be short-lived given the commodity nature of Micron’s products.”
Right now, it’s too early to say how long China may be a drag for Micron, but if Mehrotra is right, investors should take heart that the company is going to be another beneficiary of the coming AI boom.
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Micron Technology Inc. shares rose in the extended session Wednesday after the memory-chip maker’s chief executive called the bottom on the sector, and quarterly results came in better than expected.
Micron
MU,
shares had jumped more than 5% after hours following the release of results, but by the end of the company’s conference call with analysts, the stock was up less than 2%. Shares finished Wednesday’s session with a 0.4% gain to close at $67.07, while the S&P 500 index
SPX,
declined less than 0.1%.
The Boise, Idaho-based company forecast an adjusted loss of $1.26 to $1.12 a share on revenue of $3.7 billion to $4.1 billion for the fourth quarter, while analysts surveyed by FactSet had estimated a loss of $1.07 a share on revenue of $3.88 billion for the fourth quarter, and a loss of $4.65 a share on revenue of $15.32 billion for the year.
Read: Snowflake stock rallies as ‘blizzard’ of AI product announcements make Wall Street happy
In the near term, Micron Chief Executive Sanjay Mehrotra told analysts on the call that while sales forecasts received a considerable boost from larger-than-expected AI sales, forecasts for PC, smartphone and standard server sales are looking worse than feared, and will eat into those gains. All told, however, the CEO told analysts that supply reductions are beginning to stabilize the market.
Micron Chief Financial Officer Mark Murphy said the company took about $400 million in inventory write-downs in the third quarter, contributing to negative gross margins of 16%, an improvement of 15 percentage points sequentially. When Micron reported its worst loss ever a quarter ago, the company had taken a $1.4 billion inventory charge. When Micron started flashing signs of negative margins earlier in the year, many analysts saw that as signs of a bottom on the horizon.
Read: Is Micron selling memory chips for less than they cost to make? That may mean the bottom is near.
Micron makes two types of memory chips: DRAM, or dynamic random access memory, the type of memory commonly used in PCs and servers; and NAND, the flash memory chips used in smaller devices like smartphones and USB drives. After prices for memory soared early in the COVID-19 pandemic, companies overbought large stores of chips to avoid shortages, creating a glut.
“As we have said before, AI servers have six to eight times the DRAM content of a regular server and three times the NAND content,” Mehrotra told analysts on the call. “In fact, some customers are deploying AI compute capability with substantially higher memory content.”
For the third quarter, Micron reported third-quarter loss of $1.9 billion, or $1.73 a share, versus net income of $2.63 billion, or $2.34 a share, in the year-ago period.
The adjusted loss, which excluded stock-based compensation expenses and other items, was $1.43 a share, versus net income of $2.59 a share in the year-ago period.
Revenue dropped to $3.75 billion from $8.64 billion in the year-ago quarter, as a two-year shortage of chips, triggered by the COVID pandemic, flipped quickly, but unevenly, into a glut around this time last year. Analysts surveyed by FactSet had forecast a loss of $1.61 a share on revenue of $3.65 billion.
“We believe that the memory industry has passed its trough in revenue, and we expect margins to improve as industry supply-demand balance is gradually restored,” Mehrotra had said in an earlier statement.
The CEO also called a recent order by the Chinese government to stop using Micron chips because of alleged serious, but unspecified, risks “a significant headwind that is impacting our outlook and slowing our recovery.”
On the call with analysts, Mehrotra said he expects to see a “record total addressable market in calendar 2025 along with a return to more normalized levels of profitability.”
Leading up to earnings, analysts had said that Micron is “at the bottom of this deep downturn,” but “China complicates the recovery plan.” For the year, Micron shares are up 34%, compared with the S&P 500’s 14% gain.
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Shares of Nvidia Corp. and Advanced Micro Devices Inc. slumped in the extended session Tuesday following a report that the Biden administration is considering a new ban on sales of AI chips to China.
Nvidia shares
NVDA,
A fell 3% after hours, following a 3.1% gain to close at $418.76, while AMD shares
AMD,
also fell 3%, after a 2.7% gain in the regular session to close at $110.39.
Late Tuesday, the Wall Street Journal reported the Commerce Department could further block sales of AI chips to China unless U.S. companies first obtain a special license.
The ban would follow upon similar actions last year that threatened $400 million in Nvidia sales, but the company found a workaround in supplying a version of products that avoided the ban.
Read: AMD launches new data-center AI chips, software to go up against Nvidia and Intel
Both Nvidia and AMD have launched new AI chips this year: Nvidia in March and AMD earlier in the month. Last year’s release of Open AI’s ChatGPT generative AI — with billions of dollars invested by Microsoft Corp.
MSFT,
— resulted in an explosion of interest in artificial-intelligence technology, prompting luminaries to herald the technology as the biggest thing in tech since … you name it.
Read: Bill Gates says AI is only the second revolutionary tech advancement in his lifetime
News of the possible ban happened to follow a claim earlier in the day from Baidu Inc.
BIDU,
on the Chinese search company’s blog, which said its Ernie 3.5 version AI outperformed ChatGPT’s earlier version “in comprehensive ability scores,” and its latest iteration, GPT-4, which was released in mid-March, “in several Chinese-language capabilities.”
Baidu’s claim appeared to be based upon performance metrics published in China Science Daily. On Wall Street, ADRs of Baidu were down 0.7% after hours, following a 3.1% gain to close at $143.90.
As of Tuesday’s close, Nvidia shares were up 187% in 2023, and AMD shares were up 70% for the year.
Read: Snowflake adds partnerships with Nvidia and Microsoft for AI double play
Shares of Super Micro Computer Inc.
SMCI,
which have benefited from AI, also declined 3% after hours, while shares of Intel Corp.
INTC,
which supplies chips to data centers, saw shares decline 1% after hours.
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/nvidia-stock-price-ai-tesla-5af5041c
Shares of newly minted $1 trillion company
Nvidia
were taking it on the chin Monday, and investors searching for a reason should look to
Tesla
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Stock futures were falling following three straight days of losses for Wall Street. Federal Reserve Chairman Jerome Powell again will be delivering testimony before Congress. His comments on Wednesday that the central bank likely would be raising rates further this year pushed markets lower.
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Chip maker
Intel
offered positive news on its foundry business Wednesday as it continues to build out new facilities to expand the custom chip-making service. Investors sold the stock anyway.
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Intel Corp. plans to build a “huge and unprecedented” $25 billion advanced chip manufacturing plant in Israel, Prime Minister Benjamin Netanyahu announced Sunday.
The agreement in principle would see a factory in Kiryat Gat open by 2027, according to a statement from Israel’s Finance Ministry.
“This is the largest investment ever in the State of Israel,” Netanyahu’s office said in a tweet Sunday. “It is an expression of great confidence in the Israeli economy and reflects the strength of the free economy we have built, and the technological economy we’re developing here.”
Intel has operated in Israel since 1974, and has a number of facilities there.
An Intel
INTC,
spokesperson confirmed the company’s “intention to expand manufacturing capacity in Israel” in support of Chief Executive Pat Gelsinger’s “IDM 2.0” strategy, which includes expanding manufacturing capabilities around the world.
Intel is looking to reduce its reliance on Asian chip manufacturing to avoid potential snags in the global supply chain. Last week, the Santa Clara, Calif.-based company announced a $4.6 billion semiconductor assembly and test facility in Poland.
Intel shares rallied to their best week in 14 years Friday, as analysts and investors expressed excitement about opportunities for AI to drive stronger growth.
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Voiced by artificial intelligence.
Europe cannot ignore Taiwan’s desire for “better relations” if EU countries such as Germany are keen to acquire advanced microchip-making technologies from the island, Taiwanese Foreign Minister Joseph Wu said.
Speaking to POLITICO and other media on his trip to Europe, Wu questioned the enticements Europe is offering TSMC when asked why the world-leading chipmaking giant based in Taiwan has still not come to a decision to build a new plant in Germany.
“If Europe has provided very positive incentive, and also speak with the TSMC in a way that will make the TSMC feel comfortable, that their investment in Europe is going to produce very positive results … their investment in Europe is certainly not going to be stopped by the government,” Wu said.
“Even though we are not selfish in stopping the TSMC, for making investment in other countries, we certainly hope that other countries who want to attract TSMC to make investment can also think about the situation Taiwan is in, or TSMC’s position in Taiwan, and the position Taiwan is seeing in this geo-strategical landscape,” he said.
In contrast, Wu called Japan and the U.S. — where TSMC plants will be completed next year — a “like-minded partner” and “a very good partner of Taiwan,” respectively.
“I think this is some philosophical thinking, rather than government policy of putting conditions on TSMC making investment in other [countries],” Wu said. “That philosophical issue is that when a country is in shortage of computer chips, they will ask Taiwan, ‘you should do this, and you should do that’ — but they don’t seem to be thinking about a broader picture of better relations with Taiwan, economic or otherwise.”
Wu’s comments are a pointed though veiled criticism aimed at Germany.
At the height of the coronavirus pandemic in 2021, then-German Economy Minister Peter Altmaier asked his Taiwanese counterpart, Wang Mei-hua, to intervene regarding TSMC’s reduced supply to the German auto industry, according to a letter reported by Reuters. “I would be pleased if you could take on this matter and underline the importance of additional semiconductor capacities for the German automotive industry to TSMC,” said the letter written by Altmaier, who was a key member of Angela Merkel’s government which put a priority on trade with China.
One of Wu’s main missions in Europe — in a trip that took him to Prague, Brussels and Milan — was to shore up diplomatic support for Taiwan among European leaders.
He welcomed the EU’s repeated calls on Beijing to maintain the status quo in the Taiwan Strait. “China might also sense that it might come down with some economic price for their possible aggression against Taiwan, so sanction or other types of economic means against China, and I think the European countries have been discussing about that as well,” he said.
Even if the EU has taken a more critical view of China as a result of the coronavirus pandemic, which began in China, as well as Beijing’s stance on Russia’s war against Ukraine, Taiwan still faces challenges while engaging with Europe.
On trade, the European Commission has been reluctant to begin negotiations for a bilateral investment agreement (BIA) with Taiwan, apparently out of concern about retaliation from Beijing.
“We are very concerned that the BIA between Taiwan and EU seems to be called as a hostage to the stalling CAI negotiations,” Wu said, referring to the comprehensive agreement on investment between the EU and China. “But if you look at the linkage — close linkage — between Taiwan and the EU, in economic sense, I think EU needs to find an alternative to strengthen the bilateral economic or trade relations, rather than get bogged down by the CAI which is not going anywhere,” he said.
“We hope we can persuade the EU leadership to think about this in a positive way,” Wu added.
Due to diplomatic protocol under which all EU member countries recognize the “one China” policy, the Taiwanese officials requested that POLITICO and the other media not disclose the location where the interview was conducted. Nor could Wu say which EU officials he met with, or whether he planned to have meetings at NATO, also based in Brussels. (One of the few EU figures confirming Wu’s presence in Brussels was European Parliament Vice President Nicola Beer, who tweeted about their meeting and called Taiwan a “firm member of the democratic family.”)
Despite the EU’s lack of public acknowledgment of his visit — as well as the European public’s preference of “staying neutral” in the event of a U.S.-China conflict over Taiwan — Wu still has high hopes that the bloc’s attitude would change.
“I don’t think morally, any sensible country, any sensible leader can stay neutral and say, ‘No, we’re not going to pay any attention to [the] atrocity,'” he said, referring to potential Chinese invasion of Taiwan.
“And I think the same can apply to the situation between the U.S. and China. If China initiated any aggression against other countries, in killing innocent people, violating international laws, causing atrocities and destructions, and killing innocent people, and all that, and the United States is trying to help, I don’t think the European countries can say that it’s a matter … between the U.S. and China,” Wu said.
“When the international community discuss about the major international principles,” he said, “I think it’s going to be very hard for Europe to say that ‘I don’t care’.”
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Stuart Lau
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By Adria Calatayud
STMicroelectronics and Sanan Optoelectronics said Wednesday that they are forming a semiconductor-manufacturing joint venture in China, with $3.2 billion in total build-out funding.
The European and Chinese semiconductor companies said they have signed an agreement to create a silicon-carbide-device manufacturing project in Chongqing, China, to tap into rising demand for semiconductors for car electrification as well as for industrial power and energy applications in the country. Production is expected to start in the fourth quarter of 2025, with full build-out anticipated in 2028, the companies said.
The expected $3.2 billion for the full build-out of the joint venture includes capital expenditures of about $2.4 billion over the next five years, which will be funded by contributions from STMicroelectronics and Sanan Optoelectronics, support from the local government and loans, the companies said.
Sanan will separately build a silicon-carbide-substrate manufacturing plant to fulfill the needs of the joint project, the companies said.
Completion of the project remains subject to regulatory approvals, STMicroelectronics and Sanan said.
Write to Adria Calatayud at adria.calatayud@dowjones.com
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These Stocks Are Moving the Most Today: Palo Alto, Dish Network, C3.ai, EPAM Systems, and More
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Artificial intelligence may destroy humanity, but not before creating enormous wealth. Such is the paradox that now confronts investors after
Nvidia
recent earnings report inadvertently created a large-scale ethics experiment on Wall Street.
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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
https://www.barrons.com/articles/amazon-misses-rally-8a6e2511
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Chip stocks experienced a significant surge Thursday in the wake of Nvidia Corp.’s upbeat commentary on AI-fueled demand — with one notable exception.
Shares of Intel Corp.
INTC,
were down more than 5% in afternoon trading Thursday, leading Dow Jones Industrial Average
DJIA,
laggards by a wide margin, on a day when Nvidia Corp.’s
NVDA,
stock was up 26% and the PHLX Semiconductor Index
SOX,
was ahead 6%.
Read: Chip index heads for highest close in 13 months as Nvidia momentum lifts semiconductor stocks
Nvidia delivered a stratospheric beat on its quarterly revenue outlook Wednesday afternoon, with executives discussing how spending on artificial intelligence is already starting to drive sizable financial benefits for the company. That discussion has Wall Street thinking that many other chip makers will also be able to capitalize on the same wave of interest in the hot technology — shares of Monolithic Power Systems Inc.
MPWR,
Advanced Micro Devices Inc.
AMD,
and Taiwan Semiconductor Manufacturing Co.
2330,
TSM,
all joined Nvidia in gaining by double-digit percentages in Thursday’s session.
Intel, though, was a key outlier. Nvidia’s commentary seemed to make investors more worried that Intel is behind the curve on what some see as a massive technological revolution.
Nvidia CFO on record-breaking forecast: ‘The inflection point of AI is here’
Intel’s revenue and profits from central processing units look “even more at risk” after Nvidia’s report, while Intel doesn’t have “any real” competitive position in graphics processing units or generative-AI compute, wrote Mizuho’s Jordan Klein, a desk-based analyst associated with the company’s sales team and not its research arm.
Nvidia’s earnings call “will reinforce the negative view that [Intel] and all their CPU share is a major loser and share donor to GPU, ASICs and lower power ARM design chips on the way,” Klein added.
While Nvidia GPUs typically would run alongside CPUs from either Intel or AMD, Nvidia has been making inroads in CPUs. Chief Financial Officer Colette Kress said on Nvidia’s call that the company has seen “growing momentum for Grace with both CPU-only and CPU-GPU opportunities across AI and cloud and supercomputing applications.”
Read: ‘Ride the Nvidia wave.’ Wall Street says the ‘undeniably pricey’ stock can keep roaring.
Nvidia is perceived to be ahead of the pack in AI-related computing technology, but AMD is at least in a better position than Intel, with more of a one-stop shop across CPUs and GPUs. That’s likely why AMD’s stock is riding on Nvidia’s coattails Thursday, up more than 10% in afternoon action.
AMD is “the only other real GPU supplier,” Klein wrote, though the company “could lose CPU spend in process and [has] a far way to go to catch [Nvidia].”
In his view, it “will take some time for more advanced and higher performance GPU and software platform to ramp and really drive upside potential” at AMD. “But seeing how fast and much [Nvidia] benefited, few will want to wait and see how long that takes for AMD.”
A more clear beneficiary, he noted, is Taiwan Semiconductor, whose stock was up more than 12% Thursday. You “cannot get any of these GPUs, inference, etc. without their fabs,” according to Klein.
As for Intel, Klein likes that the company is approaching a second-quarter bottom and positioned to capitalize on a personal-computer refresh, but he said its stock “feels totally stuck at best and could get shorted.”
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