We're Watching This Holding Following Bullish Amazon News

In looking at some of our Portfolio holdings, we see that shares of Qualcomm QCOM are still trapped in the $165 to $175 trading range that they have been in since mid-September. Not only do we now have Taiwan Semi’s TSM robust October revenue report in hand, but we are approaching Qualcomm’s IoT and automotive diversification strategy led Investor Day 2024 coming up on November 19.

Part of our thesis on the shares has been the ramp in AI PC demand, which stood at 58 platforms for Qualcomm exiting September compared to 20 earlier this year, which should diversify its revenue stream. That has the dual benefit of lessening Qualcomm’s reliance on the smartphone market and Apple.

We see the automotive business adding another leg to that diversification but recognize that design wins in that market take years, not months, to ramp. Current forecasts put the automotive chip market on target to hit $59.3 billion this year but we’re more interested in the outlook that calls for about 11% in compound annual growth over the 2024 to 2033 period. What’s at play here is not just EVs that have larger semiconductor content than combustion engine vehicles, but also the expanding array of safety, entertainment and assisted driving features. While still relatively small today at just under 9% of total revenue, program wins and increasing dollar content per car have grown that from just over 6% in the September 2023 quarter. That’s saying something, given Qualcomm’s overall year-over-year top-line growth of 18.2% in the September 2024 quarter.

We also have to recognize the Arm ARM overhand will be with us for at least the next several weeks. We continue to see that ending in a new licensing agreement but understand the path to that could be bumpy.

As these dominos fall by the wayside and the markets grasp how Qualcomm’s business mix will shift over the coming years, we suspect that will garner more fans. We have some room to nibble further on QCOM shares in the Portfolio, but as we discussed in our opening comments on Tuesday morning, we will at least wait until we get through this week’s inflation data before making any moves. Should the market reaction to that inflation data and subsequent Fed comments push QCOM shares closer to oversold territory than not, that would be a very nice pick-up point.

Marvell: Amazon Gets Ready to Ship Trainium 2 AI Chips

In terms of our other chip holdings, this morning Loop Capital initiated coverage on Marvell MRVL shares with a Neutral rating. As we think about this, we are also reading in the Financial Times that Amazon AMZN will make its Trainium 2 chips widely available next month. Our thinking is that recent data points, including TSM’s recent revenue reports, bode well for Marvell’s quarterly earnings while the launch of Amazon’s chips should support a nice outlook when Marvell reports in December. Remember, Marvell is working not only with Amazon but also Meta META and Microsoft MSFT on proprietary AI chipsets.

As it relates to Marvell’s non-AI and data center business, we’ll be looking for confirmation in Cisco’s CSCO earnings and comments about its networking and carrier infrastructure businesses. We would not be surprised if Cisco’s view that ramping AI demand will drive an upturn in demand for those markets.

For now, we’ll keep our MRVL price target at $105 but as we digest each of these events, we’ll revisit it as needed.

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At the time of publication, TheStreet Pro Portfolio was long QCOM, MRVL, AMZN, META and MSFT.