In this article, we discuss 5 American stocks with high exposure to China. If you want to see more stocks in this selection, check out 10 American Stocks with High Exposure to China.
5. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
QUALCOMM Incorporated (NASDAQ:QCOM) is a California-based company that develops foundational technologies for the wireless industry worldwide. In 2021, QUALCOMM Incorporated (NASDAQ:QCOM) reported a full-year revenue of $33.5 billion, and $22.5 billion came from China. This means roughly 67.4% of the firm’s total revenue was exposed to China. QUALCOMM Incorporated (NASDAQ:QCOM) is one of the companies with the highest exposure to China, and an economic slowdown in China will lead to problems for the company.
On July 29, DZ Bank analyst Ingo Wermann downgraded QUALCOMM Incorporated (NASDAQ:QCOM) to Hold from Buy with a $150 price target.
According to Insider Monkey’s data, 71 hedge funds were bullish on QUALCOMM Incorporated (NASDAQ:QCOM) at the end of Q2 2022, compared to 73 funds in the prior quarter. Alkeon Capital Management is a significant position holder in the company, with 4.2 million shares worth $541.15 million.
Here is what ClearBridge Investments Large Cap Value Strategy has to say about QUALCOMM Incorporated (NASDAQ:QCOM) in its Q4 2021 investor letter:
“Market strength continued in the fourth quarter, with only the communication services sector down in the Russell 1000 Value Index. Portfolio returns benefited from the strong performance of semiconductor maker Qualcomm, which has executed exceptionally well in pursuing the transition to 5G, growing both content and share due to its leadership position in cellular technology. The chipmaker recently outlined a number of peripheral growth opportunities outside of mobile markets, including automotive (where it hopes to leverage its strong presence in the automotive infotainment space into advanced driver assistance systems), Internet of Things (including opportunities in the PC market, VR/AR market, and factory automation) and radio frequency (where mmWave adoption globally, including China, would drive substantial upside).”
4. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 72
Tesla, Inc. (NASDAQ:TSLA)’s Elon Musk has said that of the 3 million vehicles the company has produced, one-third of them have been built in China. Tesla, Inc. (NASDAQ:TSLA)’s Shanghai factory was opened in 2018, and there was a lot of production backlog due to COVID-19 restrictions and supply shortages. China is one of the main markets for Tesla vehicles and Musk has said that it would eventually become the biggest end-market for the company.
On August 25, Berenberg analyst Adrian Yanoshik lowered the price target on Tesla, Inc. (NASDAQ:TSLA) to $290 from $850 and maintained a Hold rating on the shares. The analyst adjusted the target to factor in the 3:1 stock split. He expects Tesla, Inc. (NASDAQ:TSLA)’s gross margin to benefit as its production mix moves away from Fremont, California, “which suffers from high labor costs, an inefficient layout and relatively dated equipment”. However, after demo drives, the analyst sees restricted near-term potential from autonomous driving.
According to Insider Monkey’s data, 72 hedge funds were bullish on Tesla, Inc. (NASDAQ:TSLA) at the end of Q2 2022, compared to 80 funds in the prior quarter. ARK Investment Management is a notable stakeholder of the company, with 1.4 million shares worth over $1 billion.
Here is what Grantham Mayo Van Otterloo & Co. LLC had to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla, Inc. (NASDAQ:TSLA). At its Battery Day last year, Tesla, Inc. (NASDAQ:TSLA) projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”
3. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
NIKE, Inc. (NYSE:NKE) manufactures and markets athletic footwear, apparel, equipment, and accessories worldwide. According to Barron’s, as of May 2022, NIKE, Inc. (NYSE:NKE) has 18% revenue exposure to China. Exane BNP Paribas analyst Laurent Vasilescu on August 9 downgraded NIKE, Inc. (NYSE:NKE) to Neutral from Outperform with a price target of $118, down from $151. NIKE, Inc. (NYSE:NKE) highlighted a strategy to increase revenues by high-single to low-double digits and reach a high-teen EBIT margin by FY25 and these targets were mentioned in last July’s 10-K filing, the analyst told investors. However, he observed that these FY25 financial targets were redacted in the 10-K recently released and these targets might be “on pause” due to growing uncertainty in China. NIKE, Inc. (NYSE:NKE) is also experiencing likely market share losses and increased discounting in the United States, its biggest market, contended the analyst.
Among the hedge funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management featured as the largest stakeholder of the company in Q2, with 8.5 million shares worth about $873 million. Overall, 72 hedge funds were bullish on the stock at the end of June, up from 67 funds in the earlier quarter.
In its Q4 2021 investor letter, ClearBridge Investments highlighted a few stocks and NIKE, Inc. (NYSE:NKE) was one of them. Here is what the fund said:
“NIKE, Inc. (NYSE:NKE) is another play on e-commerce as well as the anticipated growth in consumer spending as we learn to live with COVID-19. After selling out of the stock in 2016 due to competitive concerns, we were motivated to repurchase shares because of optimism around a new management team’s focus on accelerating Nike’s shift toward e-commerce and direct-to-consumer (DTC) distribution. Near-term supply chain issues in Vietnam and retail weakness in China that we see as ephemeral provided a good buying opportunity. We do not believe the market is giving proper credit to Nike’s potential to deliver attractive, high-single-digit revenue growth while delivering operating margin expansion as more merchandise is sold direct. NIKE, Inc. (NYSE:NKE) is also still under-indexed to the women’s category, which we see as a significant ongoing catalyst.”
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) is headquartered in Santa Clara, California, providing graphics, networking, and semiconductor solutions in the United States, Taiwan, China, and internationally. The company sells its GPUs to many Chinese firms, and the slowdown in consumer demand in China has really impacted NVIDIA Corporation (NASDAQ:NVDA).
On August 25, Morgan Stanley analyst Joseph Moore said NVIDIA Corporation (NASDAQ:NVDA)’s softer guidance in its gaming business should “clearly frame the bottom” after a 60% drop in quarterly revenues in only two quarters. However, the data center slowdown and ancillary challenges around the business make him “pause” due to the higher multiple and the “unexpected questions” on the data center side. After NVIDIA Corporation (NASDAQ:NVDA)’s Q2 results, he maintained an Equal Weight rating on the stock with a $182 price target.
According to Insider Monkey’s Q2 data, 84 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA), down from 102 funds in the last quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is one of the significant stakeholders of the company, with 2.5 million shares worth about $386 million.
Here is what ClearBridge Large Cap Growth ESG Strategy has to say about NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2022 investor letter:
“Chipmaker Nvidia (NASDAQ:NVDA) has also been pressured by multiple compression of higher growth companies and weakness in its gaming business. While Nvidia has grown into a top 10 position with its strong performance through late 2021, we have been consistently trimming the position to derisk against short-term volatility in its gaming business. The company is clearly exposed to the semiconductor cycle but also participates in the secular growth of cloud and AI adoption through its data center business. With these secular drivers intact and new products ramping up in the second half of the year, we are maintaining an overweight to the company.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Apple Inc. (NASDAQ:AAPL) has the highest exposure to China among the big tech firms. According to Markets Insider, roughly 75%-80% of Apple Inc. (NASDAQ:AAPL)’s product sales are attributed to China and 60%-62% of its products are manufactured in China. Additionally, 18% of the company’s annual revenue is made in Greater China.
On August 19, KeyBanc analyst Brandon Nispel raised the price target on Apple Inc. (NASDAQ:AAPL) to $185 from $177 and maintained an Overweight rating on the shares. The analyst recommends owning Apple Inc. (NASDAQ:AAPL) and lifted the price target “based on strong trends”. Keybanc’s data “rapidly rebounded” after the firm’s weak results in April through June, the analyst told investors. July is seasonally the strongest growth month of Apple Inc. (NASDAQ:AAPL)’s fiscal Q4, which seems to be off to a robust start, added the analyst.
According to Insider Monkey’s data, 128 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL) at the end of Q2 2022, compared to 131 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the leading position holder in the company, with almost 895 million shares worth $122.3 billion.
Here is what Wedgewood Partners has to say about Apple Inc. (NASDAQ:AAPL) in its Q2 2022 investor letter:
“Apple grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
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