Does the vicious, hideous shortfall and shaded forecast Texas Instruments (TXN) offered Tuesday night foreshadow a chip sell off of the likes of which we saw with the cloud-based stocks after Workday's (WDAY) cautionary comments?
Is Texas Instruments as much of a bellwether as people are ascribing it? Is its business so across-the-board and meaningful, as they portray themselves on their conference call, that there is no way the fault is with themselves or their mix of business?
Is it really all about the macro, the pessimism, the trade talks, the weariness, the customer caution, as was said REPEATEDLY on the call?
This one's a tough-as-nails inquiry. You are talking about a $120 billion company with a fantastic balance sheet that has allowed for monster buybacks that will do more than $15 billion in sales. You cannot dismiss Texas Instruments lightly.But, and this is a "I Like Big Butts and I Cannot Lie" kind of thing, but, the reason why the stock of Texas Instruments has been among the best performers in the group -- up 36%, as Eric Jhonsa noted in his fantastic piece last night on TheStreet.com -- is because it has done so well to get off the treadmill of cell phone innards and make those be far less important to its pastiche of business.
What did it diversify into? How about autos -- it is a dominant auto semiconductor company. How about industrial automation? It's the one I think of first. How about the digitization of manufacturing? That's Texas Instruments.
Now I know they call out that there really isn't any strength anywhere.
I am struggling with that. First Taiwan Semiconductor (TSM) just last week spoke about strength pretty much across its entire product lines. As big and as important as Texas Instruments is in the firmament, Taiwan Semi is bigger -- a $262 billion market cap with more than $33 billion in sales. Their communications business, where the action is right now -- and where it wasn't when TXN was the default semi to own -- is doing superbly. I know you might say, well, that was last week, how about now?
Okay I will give you now: Last night a very good test and measurement company, Teradyne (TER) , talked about tremendous strength in its businesses, particularly "ongoing demand for 5G infrastructure and flash memory."
Put simply, I think that there is pin action here off of Texas Instruments, but it is not across the board. Consider it a four, not a strike, meaning that it's right to be a seller of Analog Devices (ADI) , NXP Semiconductors (NXPI) , On Semiconductor (ON) and Microchip Technology (MCHP) .
And the rest? Stocks like Marvell Technology (MRVL) and Nvidia (NVDA) , two that we own for Action Alerts PLUS? I think they are winners here. You sell them down, I think you are making a mistake. They have far less overlap than I think people realize, particularly because their 5G business are helps, not hindrances. And, in the case of Nvidia, you have so much more going for it -- artificial intelligence, gaming, driverless autos and what I am now calling oral-inference-chips that know the true meanings of phrases (go jump in a lake does not mean go jump into Lake Erie) -- that no one else has.
That's a tribute to Jensen Huang, the brilliant CEO of Nvidia, who was just named the number one CEO by the Harvard Business School Review.
Oh and the Workday slowdown? We have had endless pin action from that because those stocks were so overvalued, but also because there is so much competition now among the companies. That selloff has to do with fuel: When you think of all the new supply coming into the stock market and how these companies have to challenge each other in so many verticals, it just isn't like the semis. They are not analogous. The stocks of Salesforce.com (CRM) , Okta (OKTA) , Adobe (ADBE) and Splunk (SPLK) are my tells: four that reported good quarters that just keep getting punished, particularly the former. Not bottom there, yet, at least none that I can see.
