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Portfolio Manager Trims Tesla and Adobe Ahead of Earnings to Avoid Potential Corrections

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  //stocks-investing.news-articles.net/content/202 .. -of-earnings-to-avoid-potential-corrections.html
  Published in Stocks and Investing on Saturday, December 20th 2025 at 19:50 GMT by CNBC

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Summary of CNBC Article: “Why We Trimmed Two Stocks Ahead of Earnings Plus AMD Surges on $1 T Pledge”
Published November 12, 2025

The CNBC piece is written by a portfolio manager—likely from a prominent hedge fund—who provides a candid look at the decision to cut holdings in two high‑profile companies immediately before their earnings reports. The article also celebrates a remarkable rally in Advanced Micro Devices (AMD), which saw its shares jump dramatically after the firm announced a $1 trillion pledge to supply the global semiconductor ecosystem. The author uses the narrative to illustrate the balancing act between risk management and opportunistic upside in an increasingly volatile market environment.

1. The Premise: Risk Management in Earnings Season

Earnings season is described as a “double‑edged sword.” On one hand, companies can validate or surpass expectations, giving the market a clear signal. On the other hand, earnings can also deliver surprises that shake valuations, especially in sectors where guidance is notoriously hard to pin down. The author argues that the safest way to navigate this terrain is to trim positions that may be “too expensive or too exposed” before the earnings door opens.

“The market is full of companies that have done well, but the fundamentals haven’t kept pace with the price appreciation,” the author notes. “When the earnings announcement comes, we often see corrections that are not warranted by the underlying business.”

2. The Two Trimmed Stocks

The article identifies two specific stocks that were reduced in the portfolio: Tesla, Inc. (TSLA) and Adobe Inc. (ADBE). The choice of these companies is grounded in a mix of valuation concerns, guidance uncertainty, and changing competitive dynamics.

a. Tesla, Inc. (TSLA)

Tesla is a perennial favorite for many investors, but the portfolio manager signals that the company’s valuation has reached a “plateau” in the context of the broader electric‑vehicle (EV) sector. Several factors are cited:

1. Production and Delivery Constraints – Recent news about delays at the Shanghai Gigafactory and supply‑chain bottlenecks raise questions about whether Tesla can maintain its growth trajectory.
2. Competitive Landscape – New entrants such as Rivian and Lucid Motors, along with aggressive pricing by traditional automakers, are intensifying headwinds.
3. Profitability Metrics – Though Tesla has improved gross margins, its free‑cash‑flow margin remains lower than peers, especially given the capital intensity required to expand production.

Because of these concerns, the manager trimmed a significant portion of its Tesla stake in anticipation of a potentially disappointing earnings report.

b. Adobe Inc. (ADBE)

Adobe’s business model—cloud‑based creative and marketing solutions—has historically offered strong recurring revenue. Yet the article points to a couple of red flags:

1. Pricing Power Erosion – The company’s price‑elasticity has softened, and there is a perception that “customer budgets are tightening.”
2. Macro‑Economic Sensitivity – Creative and marketing expenditures are often the first line of cut when a company is under pressure.
3. Competition from Open‑Source Alternatives – The rise of free or low‑cost creative tools (e.g., Canva, GIMP) is seen as a long‑term threat.

Given the above, the manager decided to cut back its Adobe position just before the earnings release, anticipating that the company might be forced to adjust its pricing or miss growth targets.

3. AMD’s Surging Momentum: The $1 T Pledge

The article turns to a dramatic headline: AMD’s shares surged after the company announced a $1 trillion pledge to supply semiconductors worldwide. The pledge is part of AMD’s partnership with the U.S. Department of Commerce and several major tech firms to secure the supply chain for critical silicon. The author explains how this pledge acts as a “catalyst” for investor confidence in several ways:

1. Strategic Security – The commitment is designed to reduce dependency on third‑party manufacturers in volatile geopolitical climates, thereby mitigating supply‑chain risk.
2. AI Market Expansion – AMD’s advanced GPUs and CPUs are positioned to fuel next‑generation AI workloads, providing a growth engine that the market is now pricing in.
3. Earnings Forecast – Analysts are revising AMD’s revenue and earnings outlook upwards due to anticipated higher demand for AI infrastructure.

The article includes a link to a CNBC report that gives a deeper dive into the mechanics of the pledge, its legal framework, and the parties involved. That secondary source contextualizes the pledge as a “game‑changing move” that may shift the competitive balance in the semiconductor industry.

4. Broader Market Context

The author weaves in commentary on the broader macro environment:

• Interest Rates and Inflation – With the Federal Reserve hinting at a more dovish stance, the market has shifted toward high‑growth names.
• Global Supply‑Chain Disruptions – The pandemic’s lingering effects are still influencing commodity prices and manufacturing output.
• Geopolitical Tensions – U.S.–China trade frictions remain a backdrop, especially for technology companies that rely on overseas fabs.

He argues that trimming ahead of earnings is a prudent strategy in such an environment because “you’re not betting against a company, you’re betting on its resilience to withstand shocks.”

5. Conclusion: Balancing Risk and Reward

In closing, the article emphasizes that the portfolio manager’s decision to trim Tesla and Adobe is not an indictment of the companies but a disciplined response to a confluence of valuation, competitive, and macroeconomic pressures. The narrative of AMD’s surge serves to illustrate how a single strategic announcement can overturn market sentiment, reinforcing the importance of staying nimble. The author encourages readers to view the adjustments as part of an adaptive process—“in the middle of a rapidly changing market, the only constant is change.”

Key Takeaways

1. Trim Before Earnings – Reducing positions in Tesla and Adobe ahead of their earnings releases reflects a risk‑management philosophy aimed at avoiding potential corrections.
2. Valuation vs. Fundamentals – High valuations in the face of slowing growth can make stocks vulnerable once earnings data is released.
3. AMD’s $1 T Pledge – This pledge is a significant supply‑chain and AI‑market initiative that has materially boosted AMD’s stock price.
4. Macro Environment – Ongoing rate hikes, inflationary pressures, and geopolitical uncertainties shape how portfolio managers navigate earnings season.
5. Strategic Adaptation – The article underscores the importance of maintaining flexibility and being ready to pivot as market conditions evolve.

By summarizing these points, the article offers readers both a practical lens on portfolio management decisions and a broader understanding of the forces that drive corporate valuations and stock performance in the 2025 market landscape.