Shortly after the opening bell, we will be initiating a position in Advanced Micro Devices , buying 150 shares at roughly $184.35. Following the trade, Jim Cramer’s Charitable Trust will own 150 shares of AMD, representing 0.80% of the portfolio. As Jim previewed in his Sunday column , we are calling up AMD from the Bullpen and buying a small position for the portfolio, as we usually do with new names. AMD was once a long-term holding for Jim’s Charitable Trust dating back to the summer of 2020. However, we exited our small position in August 2023 to get heavy exposure to a different chipmaker, Broadcom , on the belief that the latter was the stronger artificial intelligence play . Back then, little was known about AMD’s MI300X, the company’s new AI accelerator chip. Broadcom, on the other hand, already had a fast-growing custom AI chip and networking businesses, along with its now-completed VMWare acquisition. Admittedly, it would have been far more profitable for us to hold onto both stocks, but the market has agreed that Broadcom was the better AI play based on their share-price performance. While AMD has been a great name to own in its own right — up 82% since our sale — Broadcom has been even better, with the stock roughly doubling over the same period. There’s two main reasons why we are returning to AMD: It has a very good AI product in the MI300X, and there’s a new PC refresh cycle getting underway. When AMD reported its first-quarter results in April, the stock fell roughly 9% the next day on numbers that could not meet Wall Street’s lofty expectations. The key focus was how much would CEO Lisa Su raise the sales outlook for the MI300X. Unfortunately for AMD at that time, expectations were completely out of whack. Although Su did raise the guide to exceeding $4 billion in 2024, up from $3.5 billion guided in January, the problem was that more bullish investors — also known as buyside expectations — wanted a number closer to $7 billion. We don’t think AMD missed the bar because of demand. The company has said the MI300X is the fastest-ramping product in AMD history thanks to key partnerships with Oracle and Club holdings Microsoft and Meta Platforms to power generative AI training and inferencing, but the market wanted more. The issue was constrained supply. If AMD’s supply improves through the second half of this year, as we expect based on the recent numbers from Micron and Taiwan Semiconductor Manufacturing Company , we think Su and AMD will be able to surprise the Street with upside to sales. We always talk about the technology leadership longtime Club holding Nvidia has because its AI products are a platform, offering a combination of best-in-class hardware and software. For AMD to really compete in AI, what it needs to do is add more AI software tools to its ecosystem. That’s why the market cheered last week when it announced plans to acquire Silo AI for $665 million in cash. We were unfamiliar with Silo AI before the news, but it is the largest private AI lab in Europe with a team of world-class AI scientists and engineers that are expected to work with AMD’s hardware unit to develop software solutions for customers. In a note published Thursday, Melius Research analyst Ben Reitzes said the acquisition “won’t put AMD on par with Nvidia, but it does help in terms of being able to support its ecosystem and driving some incremental business.” AMD’s Data Center segment — which includes sales of AI chips — is expected to generate revenues of about $12.5 billion in 2024 and jump to $18.2 billion in 2025, which would represent about 56% of total sales, according to estimated compiled by FactSet. Another business of AMD’s that we are focused on is its PC processor business, also known as the Client segment. Here, AMD is in the early innings of benefitting from the return to growth in the PC industry, supported by recent data points from IDC and Gartner, as we pointed out in Wednesday’s Homestretch . In his Sunday column, Jim called this the new reason to own AMD. As with our thesis in Club holding Best Buy , we believe this new PC cycle has legs well through 2025 as people replace the aging computers purchased during the Covid-19 pandemic and upgrade to new AI-infused PCs. After falling sharply in 2023, AMD’s Client segment is expected to return to growth this year, generate revenues of about $6.1 billion in 2024, according to the current FactSet consensus forecast. Further growth is expected in 2025, with analysts expecting $6.8 billion in Client revenue, which would represent about 21% of total sales, according to FactSet. We’re initiating the position with a price target of $210, based on a forward multiple of 38 on consensus 2025 earnings per share forecasts of $5.52. (Jim Cramer’s Charitable Trust is long AMD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
