VIDEO: Our Next Steps for This Semiconductor Name

In today’s Daily Rundown video, a tongue-tied Chris Versace lays out what we’ll be focused on in the week ahead of the November CPI and PPI reports. 

Chris also explains why Bloomberg’s article about Apple’s AAPL modem efforts is rehashing old news and something that Qualcomm QCOM addressed at its recent Analyst Day. He also discusses our next steps with Qualcomm shares as well as other catalysts on our radar, this week’s Goldman Sach GS U.S. Financial Services conference, and today’s Omnicom OMC - Interpublic IPG merger.

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here on Monday, December 9th, start of another full week for us at the Pro Portfolio. And it's going to be another important week of economic data. And as we discussed in Friday's roundup, it's data that could bring a rethink on the pace of Fed rate cuts at a time when the market is, let's face it, it's a little frothy.

Whether we're looking at PE multiples, whether we're looking at the Citibank panic euphoria index, or some of the other indicators out there, there is still some degree of headiness in the market. And if you've been reading the comments from Helene Meisler, and if you aren't, let me just stop you and say you should be reading them. Helene sees the market being volatile this week. And that's another reason why we're going to be cautious ahead of Wednesday's November CPI report and Thursday's November PPI report.

Now, as we digest those reports, we'll be thinking, yes, of course, about what do they mean for Fed policy? What do they mean for interest rates? But we'll also be paying close attention to what they have to say about the dollar and what that means for companies with meaningful business outside the US.

The dollar has been strong so far this quarter. It's traded off lately. But when we look at year over year levels, particularly as we move into the second half of November and December, it is higher. That could be a bit of a headwind for companies with meaningful business outside the US. So again, a number of things going on as it relates to the follow through from the inflation reports this week, and we'll be watching all of those, updating our thoughts, sharing those thoughts with you and of course, making any moves that we might have to when it comes to the portfolio.

In Friday's roundup, we also shared that we've been reviewing price targets for several holdings. Some of them have moved up either very close to our published price targets or, in some cases, slightly over. So we do plan on revisiting several of those, but we'll also be revisiting a number of panic points just because the market has continued, as we saw last week, to chug higher, hitting new highs along the way.

Also, in Friday's roundup, we discussed how we are going to watch a number of positions rather closely on our shopping list, most notably the shares of Lockheed Martin, Universal Display, and Qualcomm. Now, with Qualcomm in particular, Bloomberg over the weekend ran a story about Apple's modem efforts and how they may bring cellular connectivity to Macs, as well as the Vision Pro.

Now, let's just step back a little bit on this. This has been kind of an overhang, if you will, on Qualcomm's shares. We know that they have a contract with Apple that extends into 2026 or so, which means that they have a position in Apple's lineup. But as the article points out, Apple is going to slowly start bringing its modem to market with a very low-end iPhone, the iPhone SE next year. And it's likely to target higher end models in 2026.

Now, as we think about this, given when Apple typically introduces new iPhone models, especially its premium products, that tends to be in September, which tells us that, at a minimum, Qualcomm probably has an extremely solid position with Apple, at least for the next seven quarters. Whether or not Apple debuts these modems in its very high-end products, its iPhone Pro products, yet to be determined.

But let's remember as well that this has all been telegraphed as it relates to Qualcomm. It's also why Qualcomm went out of its way at its recent analyst day to really lay out its diversification roadmap, talking not only how it expects further share gains in Android smartphones, but really in the markets of automotive and IoT. And IoT is the one that captures its program wins, which are expanding in the AI PC market.

So as we think about that, we are going to pay close attention to a number of upcoming data points. Yes, the November revenue report from Taiwan Semiconductor. But let's remember, too, that in less than a month now, we have CES 2025, and that, formerly known as the Consumer Electronics Show, is where we tend to see a lot of new products being unveiled, whether it's PCs, smartphones, or just simply put, other connected devices. I think that's going to be a good positive catalyst for Qualcomm. It should also, by the way, be a nice positive for our shares of Universal Display, ones that we are also watching as well.

But let's get back to Qualcomm. We are going to let that Bloomberg article, as we like to say, wash over the shares. And as it gets absorbed, then we'll sit back and kind of formulate our next move with Qualcomm shares. And as we do that, we will, as I said, be waiting for the November revenue report for Taiwan Semiconductor. But we're also going to be on the outside waiting for November monthly revenue reports from others as well.

But we'll also be keeping close watch on any developments as the expected ARM trial starts to unfold later this month. Remember, our thinking is that ultimately ARM and Qualcomm are going to hatch a new deal, one that will be beneficial for both. We don't think that ARM wants to necessarily lose Qualcomm-related revenue. And obviously, Qualcomm wants to keep going. So I think that'll eventually settle itself out.

Longer term as Qualcomm is able to deliver on the diversification, I think folks will have to rethink how they're valuing it. And remember, from our perspective, the diversification away from the smartphone market into other markets is a very positive development for the company and one that we're going to continue to watch. The revenue report from Taiwan Semiconductor as it relates to November, it will also be a catalyst for a few other positions Apple, Marvell, and of course, NVIDIA.

And just real quickly, we are seeing a little bit of pressure on NVIDIA shares today. Some new noise that China has opened a probe into NVIDIA over suspicions that it has broken anti-monopoly laws. We'll see how this all shakes out, but it seems to be a little more saber rattling.

Remember, the US has been ratcheting up restrictions to China as it relates to AI and certain key technologies, but we're not going to ignore it. We're going to put it on our geopolitical radar screen. And we'll pay attention to it, just like we're going to pay attention to comments over the weekend from President-elect Trump over the weekend, as it relates to tariffs and other things.

As it relates to the week ahead, we're going to be mindful as well from comments being made by companies presenting at this week's Goldman Sachs US Financials Conference. In particular, we'll be listening for comments about the economy, loan activity, but also investment banking, given that we're watching that activity and what it could mean for our price targets for Bank of America and Morgan Stanley.

Now, as we do get ready for that conference, I do want to quickly touch on some news breaking this morning. That's that advertising company, Omnicom. Omnicom is going to acquire Interpublic in a deal that will reshape the advertising industry.

The questions that we'll be asking is, is this going to jump start another round of M&A? Typically, when we see one deal kind of land, it could spark follow-on activity. So we'll be watching for that.

But we're also going to want to see which firms are advising Omnicom and Interpublic on the deal. It is a sizable one. That could mean a nice fat fee. Hopefully, either Morgan Stanley or Bank of America will be involved, but we'll have to see how all that plays out.

And with that, it's going to be a busy week, as I noted. We got a lot of stuff coming, so please be sure to check your emails, your alerts. We want to make sure you get all our thoughts as we share them with you. And of course, if we make any moves with the portfolio, we want you right there with us. Thanks for watching. 

At the time of publication, TheStreet Pro Portfolio was long AAPL and QCOM.