Cramer trust plans to raise Intel stake after chip selloff

CNBC’s Investing Club said Jim Cramer’s Charitable Trust planned to buy 120 shares of Intel at about $124 each after the market opened Monday, increasing the semiconductor company’s position in the portfolio to 900 shares. After the trade, Intel would account for 2.7% of the trust, up from 2.35%, according to the club.

The planned purchase follows a two-session decline in Intel shares of about 14% last Wednesday and Thursday, which CNBC’s Investing Club attributed to profit-taking across several leading chip stocks. The club said Intel was indicated a few percent higher in premarket trading Monday and that the purchase would move the position closer to a 3% portfolio weighting.

AI spending concerns weigh on chip shares

The club said reports that Meta Platforms intends to sell excess artificial intelligence computing capacity had contributed to investor concern that the AI capital expenditure cycle could be nearing a peak. Capital expenditure, or capex, refers to the money companies spend on long-lived assets such as data centers, servers and chips. In the AI sector, spending by large technology companies has become a central demand driver for semiconductor makers and related infrastructure suppliers.

CNBC’s Investing Club said it did not share the view that the AI spending cycle is peaking. It pointed to Intel’s decision to raise prices on some consumer and server central processing units, which the club said Intel confirmed on Friday, as evidence that demand remains stronger than available supply in parts of the market.

Central processing units, or CPUs, are general-purpose chips used in personal computers and servers. If a supplier can raise prices on selected products, investors may interpret the move as a signal that customers have limited alternatives or that production is not keeping pace with orders. The club said the CPU market is likely to remain supply constrained for some time.

Foundry business remains part of the thesis

The club also cited Intel’s foundry operation as part of its long-term view on the company. A foundry manufactures chips designed by outside customers, and the business can include advanced packaging, which connects multiple chip components into systems suited for high-performance computing.

CNBC’s Investing Club said Intel could benefit from customers seeking manufacturing and packaging options beyond Taiwan Semiconductor Manufacturing Company. TSMC is the dominant independent manufacturer for many advanced chips, and any shift by customers to add alternative suppliers would be material for companies trying to build competing foundry capacity.

The club said Intel shares were trading near the level of its previous purchase in mid-June. It also disclosed that Jim Cramer’s Charitable Trust is long Intel and Meta Platforms.

CNBC’s Investing Club said subscribers receive a trade alert before Cramer trades for the trust. Under the club’s stated procedure, Cramer waits 45 minutes after issuing an alert before buying or selling a stock in the trust. If he has discussed the stock on CNBC television, the waiting period is 72 hours after the trade alert. The club also states that its information does not create a fiduciary duty and that no specific result or profit is guaranteed.

This story draws on original reporting from CNBC.