DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
When The Chips Are Down…
Semiconductor is a terrible business to be in. It’s capital intensive, has a highly concentrated supplier base, fairly concentrated customer base, the things are fiendishly difficult to make at scale, end-users (eg: you) are unbelievably demanding of the next generation of devices and expect them to be 10x better and 1/10th of the cost … oh and to top it all off, semiconductors have become so critical to the modern economy that they are the subject of a likely decades-long tug-o-war between the US, China, Taiwan and no doubt other players in the future.
Which is of course what makes the sector such a moneymaker on the way up, and a heartbreaker on the way down. Recent examples of Doomsville, U.S.A., include NVDA 0.00%↑ , MU 0.00%↑ , QCOM 0.00%↑ and others.
We could go on. You may know that right now, NVDA’s AI devices are subject to sanction policies between the US and China - it’s not a good look.
The thing is with stocks, prices don’t follow the news. They run ahead of the news. If this is news to you, read this.
The Grand Unifying Theory Of Everything
And so it is that we believe right now may be a good time to be buying semiconductor. There are many many stocks to choose from - we cover many of them in our Cestrian Tech Select newsletter - but in ETF form you can take a helicopter view and just use SMH 0.00%↑ or, if you love adrenaline more than money, SOXL 0.00%↑ .
Today we have a long idea in SMH for you. It comes with price targets and a handy stop-loss level. Now, this is the part where we normally say “for paying members only” but because the memory of Labor Day is still fresh we’ve set up a free trial option. So if you’ve yet to step up to the paid version of this newsletter, and you are quite reasonably concerned that it could be a total waste of money, just take the trial. Like it, stick around, hate it, walk. Your call.
But either which way, for paying members and free triallists alike - here’s our SMH idea.