We recently published Jim Cramer’s Exclusive List: 10 Stocks to Monitor Closely. In this article, we are going to take a look at where Advanced Micro Devices, Inc. (NASDAQ:AMD) stands against the other stocks Jim Cramer recommends to monitor closely.
On a recent episode of Mad Money, Jim Cramer emphasized the risks of straying too far from technology stocks, particularly the dominant tech companies, in today’s market. He pointed out how JP Morgan, despite being one of the best-performing banks, caused a stir by cutting its forecast, warning that estimates might be overly optimistic. This news hurt the broader market, dropping it by 93 points, although the S&P 500 saw a slight rise of 0.54%, and the tech-driven NASDAQ gained 0.84%.
“In this market, every time you stray too far from technology, especially the tech titans, you ultimately get slapped in the face by reality. That’s what happened today when the largest, and arguably best-performing, bank in the world, laid a huge egg with its forecast. They told us the estimates are too high, maybe way too high. That spoiled a big chunk of the market, ultimately dipping 93 points. The S&P inched up 0.54%, but the tech-heavy NASDAQ still gained 0.84%.”
Cramer explained that since the Federal Reserve gave positive signals, investors had shifted away from tech into other areas of the market. This shift was part of the “broadening out” that many investors had been waiting for, as it was believed to signal a healthier market. Financial stocks, which make up around 13.3% of the S&P 500, had been a source of excitement for those tired of relying on the leading tech stocks.
“For the past couple of months, ever since the Fed gave us the all-clear signal, we’ve seen money flow out of tech into long-neglected regions of the stock market. This is the fabled “broadening out” that people spent all year clamoring for. When we bring in more groups of winners, we’re supposed to have a much healthier market, at least that’s what they say. There are tons of financials in the S&P 500, about 13.3% of the index and the strength in those stocks was a source of much joy for everyone who had gotten sick of The Magnificent Seven.”
However, as Cramer noted, economic uncertainty and disappointing forecasts from bank companies disrupted this broader market strength. Daniel Pinto, the bank company’s COO, dashed hopes by signaling that the outlook for the bank wasn’t as strong as expected. The key issue was that net interest income, a critical measure for banks, was projected to miss expectations due to reduced capital market activity. For Cramer, this underperformance highlighted the danger of moving away from tech stocks too soon.
“But a funny thing happened on the way to that broadened-out market: we got economic choppiness. Or to use a more accurate phrase, we got guide-downs that were intolerable to any of the leaders, and the kiss of death to the stock of the bank. You can’t be a leader when you’re slashing your forecast for H2. That’s when the shareholders kick you to the curb and find someone new to follow.
But today, Daniel Pinto, the bank’s President and Chief Operating Officer, lowered the boom on the optimists who desperately wanted to buy something other than tech. The big bank told us that things are less bullish than we thought. There isn’t as much capital markets activity as we’d hoped this quarter, and most importantly, the estimates for next year are too high because of a likely miss on net interest income.”
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Advanced Micro Devices Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 108
Jim Cramer discusses Advanced Micro Devices, Inc. (NASDAQ:AMD), a technology company. He recently started buying Advanced Micro Devices, Inc. (NASDAQ:AMD) shares after the stock price dropped significantly in July. Despite strong financial results and positive future outlook, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s stock has continued to decline. Cramer believes that the current valuation is too low and that Advanced Micro Devices, Inc. (NASDAQ:AMD) is a good investment opportunity, especially considering its potential for growth under the leadership of CEO Lisa Su.
“Advanced Micro Devices, Inc. is an on-again, off-again Charitable Trust holding. By the way, we’ll be talking about it on Thursday at our monthly meeting. It’s now an “on” because we started buying some when it sold off in July. It actually began its slide in March and is now down close to 40% from its highs…
It’s the third-worst pullback of any chipmaker in the S&P 500. The stock is down 26% just from its lower high on July 10th. And even after rebounding a few bucks today, did you know that Advanced Micro Devices, Inc. is down for the year? Red for the year!
Really, Advanced Micro Devices, Inc.’s latest quarter was pretty good across the board. They posted modest sales and earnings beats, with better-than-expected guidance for the current quarter. The stock only jumped 4% on the news!
Now, Advanced Micro Devices, Inc. is expected to earn $5.45 per share next year, with that number growing to $7.24 per share in 2026. But in a few months, 2026 will be next year, at which point the stock would be selling for less than 20 times next year’s earnings. I believe in CEO Lisa Su, and I think Advanced Micro Devices, Inc. is a great buy into weakness. I’ve got to tell you, that puts it below a market multiple—and to me, that’s just wrong.”
A bullish thesis for Advanced Micro Devices, Inc. (NASDAQ:AMD) is built on its strong financial results and expanding presence in artificial intelligence (AI) and data centers. In Q2 2024, Advanced Micro Devices, Inc. (NASDAQ:AMD) delivered earnings per share of $0.69, surpassing expectations and beating revenue estimates by reporting $5.84 billion, an 8.9% year-over-year growth. This demonstrates the resilience of its products despite industry challenges.
Advanced Micro Devices, Inc. (NASDAQ:AMD) is positioned to benefit from the growing demand for AI and data center solutions, with its recent partnerships, including one with AWS for cloud computing, highlighting its strength in these sectors. Its EPYC processors and Instinct accelerators are key to driving future revenue as AI adoption grows. As AI and data centers continue to expand, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s growth prospects are expected to remain strong, and analysts are projecting significant earnings growth over the next year, reinforcing its appeal as a long-term investment.
Overall AMD ranks 4th on our list of exclusive stocks Jim Cramer recommends to monitor closely. While we acknowledge the potential of AMD as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.