A series of arbitrages reduce exposure to data centers and reallocate towards defensive consumption. At the same time, a switch from Intel to AMD is planned. These movements come as Nvidia is going through an episode of governance and the prospect of rate increases is rekindling caution.
Secure earnings and reduced data center exposure
Several transactions have been carried out to reduce sensitivity to the data center investment cycle and lock in gains. On Monday, the position in Eaton was reduced despite results considered solid, with a gain of around 47%, which reduces the risk linked to a possible slowdown in spending by hyperscalers as the construction of data centers faces increasing obstacles. Eaton provides energy management systems designed to optimize energy efficiency. A new line was also opened at Constellation Brands. This group, which owns Modelo and Corona, is considered low value, displays a yield of around 3% and benefits from positive trends in the beer segment, as well as profit prospects in the event of a relaxation of migration policies. On Tuesday, the position in Cardinal Health was again reduced by 25 shares after an increase of approximately 23% since the end of September, which made it possible to secure a gain of 24%, while maintaining a long-term conviction in this distributor of health products. TJX Companies shares sold off on Friday following a downgrade from Gordon Haskett, who highlighted competition from Ross Stores as well as ongoing problems at Marmaxx; just before the results announcement scheduled for Wednesday morning, an average gain of around 113% was materialized. The cash freed up was used to strengthen Constellation Brands and Kimberly-Clark. It is argued that the market underestimates Kimberly-Clark’s ability to turn around Kenvue after its acquisition, with Jim Cramer highlighting the association of Huggies and Kleenex with Tylenol and Band-Aid.
Scheduled switch from Intel to AMD in data center chips
A rotation is planned: exit Intel and initiate AMD as soon as trading constraints allow. On Friday, Jim Cramer called AMD’s decline a “terrible buying opportunity.” The shift reflects increased confidence in AMD’s ability to capture surging data center demand. The uproar surrounding Nvidia is seen as likely to open up GPU market share to AMD, while the team says it will rely more on AMD to meet the boom in CPU requirements needed to run AI agents. The CPU argument had motivated the purchase of Intel earlier in the year. AMD’s alleged advantage comes from more flexible designs, making it easier to allocate between PCs and servers, a point seen as key as rising memory prices weigh on PC demand. On Wednesday, the conversation publicly shifted towards an exit from Intel and a purchase of AMD; Intel was downgraded to a 3-equivalent rating for Sell and AMD added to the Bullpen. The operation would involve a substantial admitted loss on Intel, with Jim Cramer recalling: “Sometimes you just have to admit you were wrong”, as at the 4th annual meeting of the Investing Club.
Governance shake-up at Nvidia and market effect
Over the week in question, Nvidia fell by around 13%, countering a rebound in semiconductors, with another drop of 2% on Friday. The sell-off began Monday following revelations of a board investigation into CEO Jensen Huang’s affair with a woman suspected of spying for China, as well as accusations of relationships with two female employees, leading, according to these same sources, to his resignation on Thursday. Colette Kress, who had long served as CFO, was named interim CEO. Jim Cramer approved the appointment but stressed the element of uncertainty, judging that an Nvidia company without Jensen would be less attractive to many investors. On Tuesday, the value was downgraded to a rating equivalent to 2, Jim Cramer indicating not to strengthen on the decline but not to turn his back on the title, citing Apple’s precedent after Steve Jobs and his confidence in Kress. He also recommended that long-term shareholders with significant gains consider taking profits to protect capital.
A macro context shared between weekly recovery and inflation pressures
Despite these turmoil, the S&P 500 posted a weekly increase of 2.5% and the Nasdaq of 2.3%, driven by two very firm sessions at the start and middle of the week, which put the declines of Tuesday, Thursday and Friday into perspective. The two indices thus made up for a notable part of the losses following the post-election crash of November 5. The week nevertheless ended under the threat of greater monetary tightening, with the possibility of several rate hikes at upcoming Federal Reserve meetings weighing on sentiment. Ahead of Friday’s open, the October PPI posted its strongest annual gain in nearly four years; although it was more moderate than expected from one month to the next, its annual rate of 6.5% revived concerns after a consumer price indicator considered high on Tuesday.
