Cramer rejects Apple downgrade and favors Intel after Arm selloff
CNBC’s Jim Cramer said KeyBanc’s Apple concerns were speculative and pointed to Intel as Arm shares fell on a downgrade tied to foundry constraints.
By Marcus V. Thorne · Markets Editor
· 3 min read
U.S. stocks advanced Tuesday after a softer-than-expected June consumer inflation reading reduced concern that the Federal Reserve would lift interest rates this month, according to CNBC’s Investing Club. The broader rally did not extend evenly across technology, as IBM shares dropped roughly 26% after the company warned of weakness in software, while Apple and Arm Holdings also traded lower following analyst downgrades.
Jim Cramer, speaking on the CNBC Investing Club’s weekday “Morning Meeting,” said IBM’s warning showed that artificial intelligence-related corporate spending continues to shift toward infrastructure and cybersecurity. IBM attributed its weaker preannouncement to customers directing more spending to servers, storage and memory rather than software, CNBC reported.
IBM’s slide put the stock on pace for its worst session since October 1987, according to CNBC. The move weighed on software shares, underscoring investor sensitivity to signs that AI budgets may be benefiting hardware, memory and security providers more than some application and software vendors.
Apple falls after KeyBanc downgrade
Apple shares slipped nearly 1% after KeyBanc cut its rating to underweight, a sell-equivalent call, and lowered its price target to $250, according to CNBC. Apple had closed Monday at $317.
KeyBanc’s analysts argued that U.S. wireless carriers are reducing handset subsidies, a shift they said could lengthen iPhone replacement cycles and make Wall Street’s growth assumptions too high. Carrier subsidies lower the upfront price consumers pay for new phones, so reductions can make upgrades less attractive or push purchases further out.
The analysts also said recent price increases on Macs and iPads could pressure unit sales and, over time, slow Apple’s services business, which carries higher margins. Services revenue depends in part on the size and activity of Apple’s installed base, so weaker device volumes can affect that segment if fewer users enter or refresh the ecosystem.
Cramer disputed the downgrade’s reasoning, saying the concerns rested too heavily on assumptions about future customer behavior. “That’s all conjecture. I don’t want conjecture. I want facts,” he said, according to CNBC. He added: “I like Apple here.”
Arm pressured by HSBC call
Arm Holdings fell more than 5% after HSBC downgraded the stock to hold, citing near-term capacity limits at foundries that could restrain earnings growth, CNBC reported. Foundries manufacture chips for companies that design semiconductors but do not produce them in their own fabrication plants.
Cramer said HSBC’s report supported the Investing Club’s recent decision to exit Arm and buy more Intel shares. He praised Arm Chief Executive Rene Haas, while noting that Arm relies on third-party manufacturers for production.
By comparison, Cramer said Intel is expanding its own manufacturing base, giving the company a different operating structure from Arm. “I think Intel’s such a buy here,” he said, according to CNBC.
The CNBC Investing Club also reviewed Capital One, Bank of America, JPMorgan, Johnson & Johnson and HCA during the rapid-fire portion of Tuesday’s meeting. Cramer’s Charitable Trust is long Apple and Intel, CNBC disclosed.
CNBC said Investing Club subscribers receive a trade alert before Cramer makes a transaction for the charitable trust. Under the club’s stated policy, Cramer waits 45 minutes after sending an alert before trading, or 72 hours after an alert if he has discussed the stock on CNBC television.
This story draws on original reporting from CNBC.
