Equity Long-Short, Semiconductors, Fabricated Knowledge

Douglas O'Laughlin

Equity Long-Short, Semiconductors

Fabricated Knowledge

Learn more about the world's most important manufactured product. Meaningful insight, timely analysis, and an occasional investment idea.

Equity Bottom-Up

NVIDIA Corporation designs, develops, and markets three dimensional (3D) graphics processors and related software.  The Company's products provide interactive 3D graphics to the mainstream personal computer market.

<ul><li>Nvidia posted earnings yesterday, and guidance was light of buy-side bogeys. I’m not going to step into the mind game of bogeys here, but there are some finer points to focus on.</li><li>NVIDIA reports Q3 EPS $0.81 ex-items vs FactSet $0.75. Reports Q3: Revenue $35.08B vs FactSet $33.17B (2 billion beat like clockwork)</li><li>Q4 Guidance: Revenue $37.5B +/- 2% vs FactSet $37.09B (a bit light). GAAP and non-GAAP gross margins are expected to be 73.0% and 73.5%, respectively, +/- 50 bps. (also light)</li></ul>

Nvidia posted earnings yesterday, and guidance was light of buy-side bogeys. I’m not going to step into the mind game of bogeys here, but there are some finer points to focus on.NVIDIA reports Q3 EPS $0.81 ex-items vs FactSet $0.75. Reports Q3: Revenue $35.08B vs FactSet $33.17B (2 billion beat like clockwork)Q4 Guidance: Revenue $37.5B +/- 2% vs FactSet $37.09B (a bit light). GAAP and non-GAAP gross margins are expected to be 73.0% and 73.5%, respectively, +/- 50 bps. (also light)

NVIDIA: Waiting on Blackwell, and the Networking Question

Lattice Semiconductor Corporation designs, develops, and markets high speed programmable logic devices.  The Company's products provide electronic systems customers with quickly designed, easily configured components.  Lattice markets its products to original equipment manufacturers of communication, computing, industrial, and military systems.

<ul><li><a href="https://www.smartkarma.com/entities/entegris-inc" target="_blank" data-smartkarma-citation="entities:12493" rel="noopener">Entegris Inc (ENTG US)</a> - Memory spending is happening next year, but MSI remains weak.</li><li><a href="https://www.smartkarma.com/entities/astera-labs-inc" target="_blank" data-smartkarma-citation="entities:40921" rel="noopener">Astera Labs (ALAB US)</a> - This is now the second way to play a levered Trainium ramp, as they have extensive content with <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409" rel="noopener">Amazon.com Inc (AMZN US)</a>.</li><li><a href="https://www.smartkarma.com/entities/lattice-semiconductor-corp" target="_blank" data-smartkarma-citation="entities:7855" rel="noopener">Lattice Semiconductor (LSCC US)</a> - Standard kitchen sink; I like the stock long-term.</li></ul>

Entegris Inc (ENTG US) - Memory spending is happening next year, but MSI remains weak.Astera Labs (ALAB US) - This is now the second way to play a levered Trainium ramp, as they have extensive content with Amazon.com Inc (AMZN US).Lattice Semiconductor (LSCC US) - Standard kitchen sink; I like the stock long-term.

Earnings: ENTG, ALAB, LSCC, SITM, QCOM, MCHP, WOLF, ARM, ACLS, AAOI, ANET, LITE, COHR

Thematic (Sector/Industry)

<ul><li>In my opinion, this week’s big news in the semiconductor industry is the ramp of Trainium. It’s a bit subtle, but I will walk you through the secondary impacts and then give you an idea.</li><li>Let’s start at the source and walk backward from there. Amazon finally woke up. <a href="https://www.semianalysis.com/p/amazons-cloud-crisis-how-aws-will" target="_blank" rel="noopener">SemiAnalysis’s piece on why Amazon will lose the future of AI</a> has pretty much turned out correct.</li><li>AWS has a fundamentally different view of how to run infrastructure, and most of it is driven by effectively pursuing Amazon basics at scale for their AWS property.</li></ul>

In my opinion, this week’s big news in the semiconductor industry is the ramp of Trainium. It’s a bit subtle, but I will walk you through the secondary impacts and then give you an idea.Let’s start at the source and walk backward from there. Amazon finally woke up. SemiAnalysis’s piece on why Amazon will lose the future of AI has pretty much turned out correct.AWS has a fundamentally different view of how to run infrastructure, and most of it is driven by effectively pursuing Amazon basics at scale for their AWS property.

<ul>
<li>Another week of earnings. I will start with a summary and then go into specific bits from each company.</li>
<li>I continue to like automotive, specifically semiconductors.</li>
<li>However, despite sequentially better results, we are seeing continued weakness in automotive and meaningful weakness in Industrial</li>
</ul>


Another week of earnings. I will start with a summary and then go into specific bits from each company.
I continue to like automotive, specifically semiconductors.
However, despite sequentially better results, we are seeing continued weakness in automotive and meaningful weakness in Industrial


Earnings: ON, AMKR, RMBS, UCTT, AMD, ASMI, KLAC, MPWR, ALGM, STM, INTC

Texas Instruments Incorporated operates as a semiconductor design and manufacturing company. The Company develops analog ICs and embedded processors. Texas Instruments has manufacturing or sales operations worldwide.

Summary: 
<ul>
<li>
TXN - Rebound in almost all end markets, even Automotive in China. Weakness in ROW, but I think it’s trough.</li>
<li>
LRCX - 25 is a growth year, taking share from Litho.</li>
<li>
MXL - Clear growth off the bottom as telecom rebounds.</li>
<li>
SK Hynix - Memory cycle ain’t over, HBM is strong.</li>
<li>
TER - Apple designed it’s own modem next year.</li>
<li>
BESI - HBM4 is looking continuously questionable if it’s going to be Hybrid Bonding.</li>
</ul>

Summary: 


TXN - Rebound in almost all end markets, even Automotive in China. Weakness in ROW, but I think it’s trough.

LRCX - 25 is a growth year, taking share from Litho.

MXL - Clear growth off the bottom as telecom rebounds.

SK Hynix - Memory cycle ain’t over, HBM is strong.

TER - Apple designed it’s own modem next year.

BESI - HBM4 is looking continuously questionable if it’s going to be Hybrid Bonding.


Earnings: TXN, LRCX, MXL, SK Hynix, TER, BESI

I was formerly employed at a Texas firm called Bowie Capital (https://www.bowiecapital.com/), where I started out of college. There I focused on compounders and quality-focused investing and had an incredible experience that let me grow as an investor. I owe a lot to my mentor and former boss, Cory Whitaker.

From there, I became interested in semiconductors, specifically the changing story of the end of Moore’s law and what that means for semiconductor stocks. I started Fabricated Knowledge as a project to further pursue that; the rest is history.