We're adding a chipmaker to our Bullpen watchlist and downgrading another name
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets are strongly rebounding for the second session in three, as the AI trade extends its recovery from last week’s dramatic sell-off. Moving past the two overhangs we discussed at last Friday’s Annual Meeting is improving sentiment in the group. First, institutional demand for Anthropic’s initial public offering appears strong ahead of next week’s planned debut. Second was CoreWeave’s earnings report, which showed demand for compute remains strong and eased investor concerns about the financing needed to support its AI infrastructure buildout. We are planning to make a semiconductor position swap as soon as our trading restrictions allow, as detailed on Wednesday’s Morning Meeting.This will involve taking a steep loss on our Intel position and moving that money into Advanced Micro Devices . AMD is Intel’s main rival in the market for central processing units (CPUs), but it also has a fast-growing data center graphics processing units (GPU) business that competes with Club name Nvidia . To better align our stock ratings with our planning, we are downgrading our Intel rating to 3 from 1 and adding AMD to our Bullpen watchlist. Jim covered what went wrong with our Intel purchases at Friday’s Annual Meeting and expressed his remorse for how it’s played out. Yes, part of our thinking involves AMD gaining share in the GPU market as this dark cloud weighs on Nvidia. We think it’s natural for AMD to pick up more orders as uncertainty persists about CEO Jensen Huang’s future at Nvidia amid the investigation into his affair with an alleged Chinese spy. It also raises questions about Nvidia’s AI roadmap if Huang were to eventually depart. The market has quickly caught on to the possibility of Nvidia losing some ground, with AMD shares up roughly 24% this week, including Wednesday’s pop, after falling 11% the previous week. For its part, Nvidia is up about 4% Wednesday, cutting into the 9.5% drop experienced across Monday and Tuesday. Another reason why we want to move into AMD and switch out Intel is because we are more confident in the former’s ability to meet the booming demand for data center CPUs, which was a key reason we initiated Intel earlier this year. A lot of this has to do with how the two companies’ chips are designed, as longtime tech analyst Ben Thompson noted in his Stratechery newsletter on Wednesday. In short, AMD can use essentially the same chiplets in both its consumer desktop and server processors, allowing the company to repurpose existing designs for servers by combining more chiplets. Intel’s chips aren’t as interchangeable. AMD CEO Lisa Su made this point on the recent third quarter earnings call. “The good part about it is our supply chain is quite fungible across our PC business and our data center business, and so that actually does afford us the ability to move supply around as we see these signals in the market,” Su said. AMD also relies on third-party foundries to manufacture the chips it designs. Intel operates its own fabs, while using external foundries for some of its needs. AMD’s Data Center segment, which includes sales of both GPUs and CPUs, increased 97% year over year in the third quarter. Sales in its Client and Gaming segment fell 8%, as the 40% decline in Gaming (mostly chips for gaming consoles) was more than offset by a 7% increase in Client (home to sales of CPUs for PCs). Compare that to Intel, which issued terrible guidance for its PC business on Oct. 29 that crushed the stock and broke our trust in management. On the earnings call, Intel executives said they’re reallocating some consumer PC resources at an Oregon facility toward data center CPU production, but this requires shifting production lines and is not as seamless as AMD. While AMD isn’t completely immune to the PC slowdown that is expected to last well into next year due to the high cost of memory, we’re more confident in the company’s ability to offset that weakness with stronger data center CPU sales given its market-share gains and ability to reallocate resources. After the closing bell on Wednesday, crop protection company Corteva will report earnings. On the heels of CoreWeave’s strength report, we’ll hear from fellow neocloud Nebius before the opening bell on Thursday. On the economic data side Thursday, we’ll see weekly jobless claims and existing home sales. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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.
