Two down. Two to go. Investors in chip stocks — ravaged this week on concerns about Chinese startup DeepSeek’s cost-efficient artificial intelligence model — took comfort in what Club names Meta Platforms and Microsoft said on their post-earnings conference calls Wednesday evening and how they held the line on their capital expenditure spending plans. However, with Alphabet and Amazon reporting earnings next week, the near-term picture of how DeepSeek’s advancements might impact semiconductor demand remains fuzzy. That’s why Jim Cramer on Thursday told Club members that he would have trimmed AI chipmaking leader Nvidia, if not restricted. Jim still thinks Nvidia should be “owned, not traded” but said he could not ignore that demand for Nvidia semiconductors, the gold standard in the AI industry, could be hurt by the possibility of clients, such as Club holdings Alphabet and Amazon , scaling back orders after DeepSeek revealed how it did more with less. During Friday’s Morning Meeting, Jim said, “Amazon is a frenemy of Nvidia. Use a lot of Nvidia chips but they also make their own.” He added, “I fear Amazon says, ‘You know what? We want to wait. We don’t want to order as many [Nvidia],'” choosing instead to work on its in-house chips and “explore third-party” options. As of late Friday, Nvidia was down 15% for the week and fellow Club stock Broadcom, which is a third-party designer of chips, was down 9.5% over the same stretch. There has been talk all week about whether DeepSeek’s claims on cost are as good as they say. An industry outlet, SemiAnalysis, published a report Friday suggesting they may not be. NVDA AVGO mountain 2025-01-24 Nvidia vs. Broadcom performance since Jan. 24 Broadcom was able to recover more of Monday’s plunge than Nvidia because of what Meta CFO Susan Li said on Wednesday’s call about expecting to “further ramp adoption of MTIA,” the Meta Training and Inference Accelerator — developed jointly with Broadcom. An increased focus by Meta on its own custom chips would be a boon for Broadcom, Jeff Marks, director of portfolio analysis for the Club, said during Thursday’s Morning Meeting. In a post-earnings analysis of Meta and Microsoft, Goldman Sachs on Thursday came away feeling upbeat about Broadcom and Nvidia. Like Marks, the Goldman analysts cited the Meta commentary on its MTIA chip, concluding it bodes “well for Broadcom’s custom compute franchise.” The analyst added, “Sustained capital spending by Microsoft and Meta will [also] benefit Broadcom’s Networking business.” During Monday’s Morning Meeting, in the throes of the selloff, Jim predicted, as it turned out correctly, that Broadcom was the name the market would eventually rally around because the company’s portfolio spans networking solutions to infrastructure software. As for the implications of hyperscaler AI-spending on Nvidia, the Goldman analysts said, “The reiteration of near-term capex budgets by Microsoft and Meta as well as their long-term thinking on scaling laws will be perceived positively by the market.” That hasn’t happened yet, but the Club also has faith in Nvidia, even as we recommend that investors lighten up a bit ahead of what Alphabet and Amazon might say next week. Alphabet reports earnings after this coming Tuesday’s closing bell. Amazon delivers its quarter results on Thursday evening. (Jim Cramer’s Charitable Trust is long META, MSFT, NVDA, AVGO. 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.
A Nvidia chip displayed at the Mobile World Congress in Shanghai on June 26, 2024.
Strs Afp | Getty Images
Two down. Two to go.
Investors in chip stocks — ravaged this week on concerns about Chinese startup DeepSeek’s cost-efficient artificial intelligence model — took comfort in what Club names Meta Platforms and Microsoft said on their post-earnings conference calls Wednesday evening and how they held the line on their capital expenditure spending plans. However, with Alphabet and Amazon reporting earnings next week, the near-term picture of how DeepSeek’s advancements might impact semiconductor demand remains fuzzy.
