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Volatile Market Drives Trades in Tech Sector
This past week was marked by significant trading activity for the Club as the stock market experienced fluctuations. A notable catalyst for this volatility was the introduction of DeepSeek, a Chinese startup boasting an AI model that it claims is not only more efficient but also cheaper than existing alternatives. This development raised concerns regarding the demand for artificial intelligence chips, ultimately leading to a substantial decline in Nvidia’s stock, which saw a decrease of over 15% by week’s end.
In light of these events, Jim Cramer advised Club members on Thursday to consider reducing their Nvidia holdings if possible. He noted, “While Nvidia should still be regarded as a long-term hold, we cannot disregard the changing market dynamics. It’s critical to recognize that technology customers might reassess their purchasing strategies, seeking better pricing or alternative solutions from competitors such as Advanced Micro Devices.”
The reactions to DeepSeek were not consistent across the board. During their recent earnings calls, both Meta Platforms and Microsoft maintained their capital expenditure plans, which provided some reassurance to investors. However, as Cramer highlighted on Friday, uncertainties loom as Alphabet and Amazon are set to report earnings next week, leaving many eager to understand the broader implications for tech spending.
This Week’s Trading Summary
Below is an overview of the Club’s transactions over the week, reflecting a market that was considered overbought for a significant portion of the week prior to Friday’s sell-off, which helped rectify this condition.
Tuesday, January 28
Purchased: 25 shares of Eaton
Trust’s holding: 300 shares of ETN
Portfolio weighting: 2.68% as of Friday
Rating: 1
Price target: $375
Eaton, a U.S. industrial firm that provides essential electrical components and power management systems necessary for data centers, was impacted by the market’s reaction to DeepSeek. However, after reporting solid earnings indicating a strong data center business, the investment appears promising. Cramer commented, “Although the uncertainties related to DeepSeek are valid, this sharp decline in Eaton’s stock presents a favorable investment opportunity, especially considering ongoing demand for data center infrastructure.”
Profit-Taking Moves
Sold: 10 shares of CrowdStrike
Trust’s holding: 245 shares of CRWD
Portfolio weighting: 2.67% as of Friday
Rating: 2
Price target: $400
With CrowdStrike shares appreciating nearly 20% over the past few weeks, Cramer expressed the importance of locking in profits on this successful position. He maintained a bullish outlook on cybersecurity, retaining exposure to both CrowdStrike and Palo Alto Networks, as security concerns remain paramount in the tech sector.
Sold: 50 shares of Danaher
Trust’s holding: 525 shares of DHR
Portfolio weighting: 3.2% as of Friday
Rating: 2
Price target: $270
Cramer noted that since late October, the Trust has incrementally increased its stake in Danaher, but with a recent uptick of nearly 9% over the last month, it was prudent to reduce exposure ahead of earnings. This strategic sale aims to cushion against a potentially cautious outlook from Danaher regarding its bioprocessing segment.
Healthcare Sector Adjustments
Sold: 75 shares of GE Healthcare
Trust’s holding: 900 shares of GEHC
Portfolio weighting: 2.18% as of Friday
Rating: 2
Price target: $95
In the context of a broader market rotation into healthcare, Cramer opted to take profits from GE Healthcare, believing the stock’s current valuation may not reflect an attractive risk/reward scenario. He suggested monitoring the stock for potential re-entry following a pullback.
As a part of the CNBC Investing Club, members are promptly alerted before trades are executed, allowing them to follow these strategic moves in real-time. Jim Cramer’s insights and decisions emphasize the importance of adapting to changing market conditions, particularly as new information related to AI and tech spending continues to emerge.
Source
www.cnbc.com