CHRIS VERSACE: Good morning, Action Alerts PLUS members, it's Thursday, September 1st. We've shut the books on August, a month that saw the S&P fall 4.2% and the NASDAQ composite shed about 4.6%. We're entering a new month but September is exiting the starting blocks on a down note given several factors, the ISM and S&P Global PMI data for August point to a slowing economy, the U.S. government is getting tough on China when it comes to next-generation chips, and word of a new lockdown in China is spurring concerns not only over global demand but renewing concerns about supply chains. All told, this is another reason we could see a rash of downward EPS revisions before we exit the current quarter.
Now granted, the market's oversold and we could see a bounce in the coming days, given the actions of the last few days, but let's remember, we remain steadfast in a bear market. What that means is we will continue to tread carefully and thoughtfully. That said, we will also act decisively when the situation arises. Case in point, this morning's news on the chip sector. What we had was an unexpected development with the US requiring a new license for certain products being exported to China and Russia. That raises fresh questions over revenue expectations for chip companies in the coming quarters.
Now, remember ahead of Nvidia's July quarter earnings we pared back the position given concerns for its PC and gaming division. That move served us rather well. But since then, Dell and HP have not only warned even more so about weakness in the PC and gaming sector, they've also raised concerns about enterprise spending, something Salesforce did as well.
Now granted, this is a unexpected development but it's simply the latest development for Nvidia shares that really skews the risk-reward trade-off far more to the risk side. And with that, yes, we are going to take some lumps in the position over the last few days. But our view is better to exit and lock in the big gains that the portfolio has in the position rather than stick around for incremental bad news in the coming weeks and potentially the coming months.
This has also led us to downgrade the shares of AMD to a 2 from a 1 rating. Granted, AMD doesn't appear to be impacted anywhere to the degree that Nvidia is, however, the market is likely to paint it with the same brush, at least in the near term. Our thought, downgrade to a 2 and potentially look to scoop up the shares in the coming weeks to help improve our position for the portfolio.
We're also going to be watching any further moves by the Biden administration in these efforts to lock down on China's chip efforts. If it moves into semiconductor capital equipment, that is going to lead us to revisit the portfolio's position on Applied Materials as well. And the backdrop of all of this has us on watch for any potential geopolitical response from China, something that could be a new wrinkle not only for the market but for the global economy.
Now, we're taking the proceeds from the sale and exit of Nvidia and we're funneling those proceeds to build the portfolio's positions in three other holdings to build out our exposure to cybersecurity, as well as companies poised to benefit from the Biden infrastructure spending law, in other words, CIBR and Vulcan Materials. We're also using the proceeds to wade deeper into our position for PepsiCo, increasing the portfolio's exposure to the dividend stream that the company has. That's a wrap for today's rundown Thanks for tuning in. We'll be back with you tomorrow.