Should you buy Semiconductor Manufacturing Int’l (ADR) (NYSE:SMI) after its newest deal with QUALCOMM, Inc. (NASDAQ:QCOM)? The giant Chinese chipmaker, also known as SMIC and its partners, QUALCOMM, Belgian research firm Imec, and Huawei Technologies, have just announced that they will form a new R&D company majority-owned by SMIC which will manufacture next-generation semiconductors. The deal comes after QUALCOMM was recently dealt a $975 million fine by the Chinese government for violating antimonopoly laws in China. The new joint venture is seen as a way for the American chip behemoth to appease Chinese regulators and continue doing business smoothly in the country. Also as a result of the new deal, SMIC is expected to cut costs in research and development and close the technology gap against rivals Intel Corporation (NASDAQ:INTC) and Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) in the production of chips that power mobile devices like smartphones and tablets. SMIC is still on the 28-nanometer (nm) process for chips while its rivals are two generations ahead at the 16nm and 14nm processes. SMIC, QUALCOMM, Inc. (NASDAQ:QCOM) and their partners expect the joint venture to lead to the mass production of 14nm chips by 2020, while rivals are expected to be making 10nm chips by that time. On the news, SMIC shares have jumped nearly 6%. Year-to-date, shares of the company have traded up by 31.75%. However, it should be noted that hedge funds tracked by Insider Monkey are bearish about Semiconductor Manufacturing Int’l (ADR) (NYSE:SMI). Let’s take a look at the data.
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We track hedge fund and insider activity in companies because these transactions lend themselves to better understanding, whether of the world’s top money managers or of the top executives of a firm, and their confidence about a particular company tends to bode well for that company’s future performance. For insider sentiment on SMIC, there were no reported changes based on data from Insider Monkey, and thus we can consider insider activity to be neutral.
With this in mind, let us look at how hedge funds have been trading Semiconductor Manufacturing Int’l (ADR) (NYSE:SMI) of late.