GFS

GlobalFoundries Inc.

53.25
USD
-2.93%
53.25
USD
-2.93%
36.81 79.49
52 weeks
52 weeks

Mkt Cap 28.32B

Shares Out 531.85M

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Why GlobalFoundries, Micron Technology, and Applied Materials Soared Today

What happened Shares of semiconductor-focused companies GlobalFoundries (NASDAQ: GFS), Micron Technology (NASDAQ: MU), and Applied Materials (NASDAQ: AMAT) were roaring higher today, up 12%, 4.3%, and 4.7%, respectively, as of 2:31 p.m. ET. There wasn't any company-specific news today for any of these stocks, although there was earlier in the week, especially for GlobalFoundries. However, broader optimism over the path of inflation, the passage of the CHIPS Act earlier this week, and today's likely passage by the House of the Inflation Reduction Act could all be helping these stocks move higher. Additionally, an article on Apple's (NASDAQ: AAPL) iPhone production plans last night may have eased some fears around the beaten-down chip sector. So what In conjunction with many clean energy stocks, many semiconductor stocks are on the rise today in anticipation of the House passing the Inflation Reduction Act, which provides subsidies to consumers to purchase new or used qualifying electric vehicles (EVs). That could be because electric vehicles require vastly more semiconductor content than traditional internal combustion vehicles. According to GlobalFoundries' recent Capital Markets Day presentation, Level 2 autonomous EVs require three times the semiconductor content of traditional cars, while Level 4 autonomous EVs require six times the amount. With only 5% EV penetration in the U.S. and 8% global penetration, it's possible EVs could see a tipping point into mass adoption with the help of this bill. On that note, GlobalFoundries produces lots of chips on mature lagging-edge nodes that are used in EVs, such as power semiconductors. Earlier this week, it announced an extension of its long-term supply agreement with Qualcomm, which notably includes Qualcomm's auto chip platform. The CHIPS Act, passed earlier this week, should also help GlobalFoundries. On the heels of GlobalFoundries' earnings beat on Tuesday and its Capital Markets Day for analysts on Thursday, Baird analyst Tristan Guerra reiterated the stock's outperform rating on GlobalFoundries, while keeping its price target at $100, about 50% higher than the price today. Guerra believes the CHIPS Act will enable the U.S.-based foundry to expand its gross margin beyond its long-term target. In this week's Capital Market presentation, GlobalFoundries outlined an ambition for today's 27% gross margin to expand to 40% over time, while also projecting 8% to 12% annual revenue growth. Memory-producer Micron also had two big announcements. First, the company guided down again for its current quarter, as the pandemic hangover in PCs continues to bite its near-term results. Citing macroeconomic worries on the part of customers, management noted a broadening of inventory adjustments that should take a couple of quarters to work through. Although Micron fell on that news, it is ending the week higher. That could be due to today's optimism over the IRA, as well as this week's signing of the CHIPS Act. Following the CHIPS Act, Micron announced a $40 billion investment in leading-edge memory manufacturing in the U.S., which will take place over the course of the decade. Micron is also highly sensitive to the broader economy, since its memory chips are commodity-like, with prices that fluctuate with supply and demand. Since the markets received some positive news on the inflation front on Wednesday, with month-over-month inflation at zero for the first time in a long time, many economically sensitive stocks blasted higher on renewed optimism for a "soft landing." Meanwhile, all of these new manufacturing subsidies should go a long way toward boosting Applied Materials, which is the largest semiconductor equipment stock by revenue. Although the stock had fallen to start the year on fears of an economic slowdown, the passage of the CHIPS Act could lead to some redundant chip manufacturing investment in the near term, perhaps softening any potential downturn -- if one even materializes. Finally, as a cherry on top of a momentous week, Bloomberg reported that Apple has told its suppliers to build at least 90 million iPhone 14 units this year. That figure would be about the same as last year, and seemed to provide a data point that smartphone demand on the high end remains resilient, in spite of fears over big declines that have plagued lower-end phone brands this year. Given Apple's size and prominence, chip companies tend to react to Apple news as well, for good or ill. Now what Semiconductor stocks had a brutal start to 2022 in anticipation of the semiconductor downturn that appears to be taking place; however, given how forward-looking this cyclical sector is, the combination of waning inflationary pressures and large manufacturing subsidies from the U.S. government this week is pointing to better times ahead. One rule of semiconductor investing: If you wait for the slump to sell or concrete positive financials to buy, odds are you will have missed a big move in the stocks, in either direction. 10 stocks we like better than GlobalFoundries Inc. When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now... and GlobalFoundries Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys. *Stock Advisor returns as of August 11, 2022 Billy Duberstein has positions in Apple, Applied Materials, and Micron Technology and has the following options: short January 2023 $160 calls on Micron Technology and short January 2023 $210 calls on Apple. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Apple, Applied Materials, and Qualcomm. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off. Today’s Big Picture Asia-Pacific equity indexes ended today’s session down across the board. India’s Sensex ended the day essentially flat, down 0.06%, China’s Shanghai Composite and Australia’s ASX All Ordinaries declined 0.54% and 0.55%, respectively while Japan’s Nikkei fell 0.65%, Taiwan’s TAIEX dropped 0.74% and South Korea’s KOSPI declined 0.90%. Hong Kong’s Hang Seng led the way, down 1.96% on a broad selloff led by Health Technology and Health Services names while Transportation and Communications sectors provided the only relief. By mid-day trading, major European equity indices are down across the board and U.S. futures point to a positive open later this morning. At 8:30 AM ET, the much anticipated July Consumer Price Index (CPI) report was released: The headline figure for the month was expected to fall to 8.7% from June’s blistering 9.1% reading with core CPI that excludes food and energy ticking higher to 6.1% in July vs. 6.0% the prior month. The actual numbers show that inflation hit 8.5%, and core inflation was 5.9%. With the national average retail price for a gallon of gas falling through late June and July from its June 14 high of $5.016 per gallon per data from AAA, forecasters had expected the month over month decline in the headline CPI for July. The July Employment Report also showed wage inflation ran hotter than expected during the month. Let’s also keep in mind that we will be facing a “wash, rinse, repeat” cycle when it comes to inflation data and expectations for the Fed given tomorrow’s July Producer Price Index report. Data Download International Economy Producer prices in Japan rose by 8.6% YoY in July, compared with market forecasts of 8.4% and following an upwardly revised 9.4% the prior month. While marking the 17th straight month of producer inflation, the latest reading was the softest since last December. China's annual inflation rate rose to 2.7% in July from 2.5% in June and compared with market forecasts of 2.9% but even so the July figure marked the highest reading in the last year. The country’s Producer Price Inflation figure for July eased to a 17-month low of 4.2% YoY from 6.1% the prior month and less than the market consensus of 4.8%. Annual inflation rate in Germany was confirmed at 7.5% YoY for the month of July, down slightly from June’s 7.6% reading but still above the March and April figures of 7.3%-7.4%. The annual inflation rate in Italy slowed to 7.9% YoY in July from June’s 8% reading matching expectations for the month. While energy prices declined, prices for food and transportation rose at a faster pace. Domestic Economy This morning we have the usual Wednesday weekly reports for MBA Mortgage Applications and Crude Oil Inventories from the U.S. Energy Information Administration. At 10 AM ET, Wholesale Inventories for June will be published, and the figure is expected to rise 1.9%. While investors and economists will keep more than a passing interest in those reports and data, as we discussed above, it will be the July Consumer Price Index report at 8:30 AM ET that will shape not only how the US stock market opens today, but also expectations for the Fed’s next course of monetary policy action. The U.S. Energy Information Administration (EIA) expects domestic production of crude oil, natural gas and coal will all increase next year compared with this year. It forecast US crude production rising 6.7% to an all-time annual high 12.7M bbl/day in 2023 from 11.9M bbl/day in 2022, US natural gas output climbing to 100B cubic feet (cf)/day from 97B cf/day, and US coal production inching up to 601M short tons in 2023 from an expected 599M this year. The EIA also modestly increased its 2022 average nationwide gasoline price forecast to $4.07/GALLON vs. $4.05 if called for last month. It now also sees 2023 prices at $3.59/GAL vs. its previous forecast of $3.57. Markets Stocks continued in their holding pattern waiting for the latest CPI print save for some fundamental stories pushing Technology names and small caps around. The Dow and the S&P 500 were down slightly at 0.18% and 0.42%, respectively while the Nasdaq Composite dropped 1.19% and the Russell 2000 closed down 1.46% on the day. Energy names led the way yesterday but were overpowered by Technology and Consumer Discretionary sectors. Here’s how the major market indicators stack up year-to-date: Dow Jones Industrial Average: -9.81% S&P 500: -13.51% Nasdaq Composite: -20.14% Russell 2000: -15.83% Bitcoin (BTC-USD): -52.08% Ether (ETH-USD): -55.38% Stocks to Watch Before trading kicks off, CyberArk (CYBR), Fox Corp. (FOXA), Jack in the Box (JACK), Nomad Foods (NOMD), Vita Coco (COCO), Tufin Software (TUFN), and Wendy’s (WEN) will be among the companies issuing their latest quarterly results and guidance. At 9 AM ET, Samsung (SSNLF) will hold its Galaxy Unpacked 2022 at which it is expected to introduce new Galaxy foldable smartphone models, a new Galaxy Watch, and Galaxy Buds. Shares of advertising technology platform company The Trade Desk (TTD) jumped after the company reported quarterly results that topped expectations and guided current quarter revenue above the consensus forecast. The RealReal (REAL) reported a smaller than expected bottom line loss for its June quarter as revenue for the period rose 47.2% YoY to %154.44 million, topping the $153.99 million consensus. However, the company issued downside guidance for both the current quarter and 2022. Revenue for the September quarter is now expected to be $145-$155 million vs. the $164.3 million consensus; for the full year of 2022, revenue is forecasted to be $615-$635 million vs. the $653.7 million consensus. Shares of Coinbase Global (COIN) moved lower after it reported June quarter results that missed top and bottom line expectations. Revenue for the quarter fell 63.7% YoY as Total trading volume fell 53.0% YoY and 29.8% sequentially to $217 billion. Monthly Transacting Users (MTUs) grew 2.3% YoY but fell 2.2% sequentially to 9.0 million. For the current quarter, Coinbase sees the number of MTUs trending lower sequentially and total trading volume to be lower compared to the June quarter. Shares of Sweetgreen (SG) tumbled in aftermarket trading last night after the company missed quarterly revenue expectations, lowered its 2022 forecast, announced it will lay off 5% of its workforce, and downsize to smaller offices. ChipMOS TECHNOLOGIES (IMOS) reported its July revenue was $65.1 million, a decrease of 19.4% YoY and down 7.7% MoM. Taiwan Semiconductor (TSM) reported its July revenue increased 49.9% YoY to NT$186.76 billion, which equates to a 6.2% MoM improvement. Electric vehicle subscription startup Autonomy placed a $1.2 billion order for 23K electric vehicles with 17 global automakers, including BMW (BMWYY), Canoo (GOEV), Fisker (FSR), Ford (F), General Motors (GM), Hyundai (HYMTF), Lucid Group (LCID), Mercedes-Benz (DDAIF), Polestar (PSNY), Rivian (RIVN), Stellantis (STLA), Subaru (FUJHY), Tesla (TSLA), Toyota Motor (TM), VinFast, Volvo Car (VLVOF) and Volkswagen (VLKAF). IPOs As of now, no IPOs are slated to be priced this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page. After Today’s Market Close Bumble (BMBL), CACI International (CACI), Coherent (COHR), Dutch Bros. (BROS), Red Robin Gourmet (RRGB), and Walt Disney (DIS) are expected to report their quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. On the Horizon Thursday, August 11 Germany: Thomson Reuters Ipsos Monthly Global Primary Consumer Sentiment Index - August US: Weekly Initial & Continuing Jobless Claims US: Producer Price Index – July US: Weekly EIA Natural Gas Inventories Friday, August 12 Japan: Thomson Reuters Ipsos Monthly Global Primary Consumer Sentiment Index - August China: China Thomson Reuters Ipsos Monthly Global Primary Consumer Sentiment Index - August Eurozone: Industrial Production - June US: Import/Export Prices – July US: University of Michigan Consumer Sentiment Index (Preliminary) – August Thought for the Day “The release date is just one day, but the record is forever.” ~ Bruce Springsteen Disclosures Tufin Software (TUFN), CyberArk (CYBR) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index Canoo (GOEV), Fisker (FSR), Lucid Group (LCID), Rivian (RIVN), Tesla (TSLA), Vita Coco (COCO) are constituents of the Tematica BITA Cleaner Living Index Canoo (GOEV), Fisker (FSR), Lucid Group (LCID), Rivian (RIVN), Tesla (TSLA), Vita Coco (COCO) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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