Roth MKM’s AI & Non-AI Stocks To Be Cautious About: 15 Stocks Bank With $60 Billion Capital Raise Is Watching

3. Teradyne, Inc. (NASDAQ:TER)

Number of Hedge Fund Holders In Q3 2024: 43

Teradyne, Inc. (NASDAQ:TER) is an industrial products manufacturer that provides products used to test and verify semiconductors and other systems. This places it right at the heart of the chip industry as the firm is indispensable in manufacturing chips. Yet, the stock is down 0.16% year-to-date as the broader industry slowdown continues to drive down the demand for non-AI chips. This exposure is also at the heart of the stock’s 15.9% drop following Teradyne, Inc. (NASDAQ:TER)’s third-quarter earnings. While the firm’s third-quarter earnings of $737 million beat analyst estimates of $716 million, the fourth-quarter guidance was tepid as non-AI sectors such as industrial and automotive continued their weak performance. Consequently, a broader economic recovery fueling the non-AI sectors will drive Teradyne, Inc. (NASDAQ:TER)’s shares.

During the Q3 2024 earnings call, Teradyne, Inc. (NASDAQ:TER)’s management shared its outlook for the non-AI sectors. Here is what they said:

“Despite roughly flat quarter-on-quarter revenue, our Robotics business has delivered 8% year-to-date growth despite a worsening industrial macro backdrop. We see our industrial automation peers with year-over-year declines averaging more than 10%. While the basic demand drivers for advanced Robotics remain, low penetration rate, the demographics of an aging population, fewer young workers willing to do factory work, and the compellingly short ROI, the industrial market that we serve is inherently cyclical, and our customers have significantly cut back on capital investment plans. We believe a more appropriate short-term indicator of progress is to consider performance relative to the peer group rather than an absolute growth metric for this business.

To consider absolute growth, one needs to look over complete business cycle. Even in the adverse business environment, the Robotics team is seeing good progress in executing its growth strategy. Our highest priority in Robotics go-to-market transformation is the development of an OEM solutions channel for UR. This channel is highly valuable because customers purchasing cobot based solutions from these partners get into production more quickly and have fewer problems than customers that develop custom solutions. In the first three quarters of the year, OEM revenue at UR is up over 50% compared to 2023. Innovation-driven SAM expansion is central to outgrowing the market. The new heavy payload UR robots that began shipping late last year have lasted well in the market and represents 16% of UR units shipped year-to-date.”