We recently published a list entitled Jim Cramer is Recommending These 10 Stocks in June. Since Advanced Micro Devices, Inc. (NASDAQ:AMD) ranks 2nd in the list, it deserves a deeper look.
Jim Cramer in a latest program talked about the effect of inflation on US consumers and discussed how it’s impacting the Haves and the Have Nots. Cramer said while everyone is feeling the “pinch of inflation,” the Have Nots are feeling a “heck of a lot more” than the Haves. Cramer said that the difference between these two classes of consumers is very important for investment portfolios. He complained that many retailers don’t even know their consumers and that’s why they have a totally different reading of the current economic situation and its effects on consumers. Cramer criticized those who aren’t careful about the differences between consumers and use “the consumer” as a blanket term.
Cramer talked about several retail companies and how they are directly feeling the effects of inflation as consumers cut back on spending. The CNBC host said that Americans are making tough choices because of rising prices but we usually don’t talk about it.
Jim Cramer said that many strategists demand several rate cuts because “they want stocks higher.”
“I want higher stock prices too but if we get multiple rate cuts and inflation comes roaring back, it’s the Have Nots that will get hurt.”
Jay Powell Is Worried About Tens of Millions of People With Almost Nothing in the Bank, Cramer Says
Jim Cramer said that while many people won’t be happy to see a strong jobs report (because that decreases the chances of rate cuts), they should keep in mind the tough situation the Federal Reserve is in.
“Jay Powell isn’t worried about those of us with big portfolios. He’s worried about the tens of millions of people with almost nothing in the bank.”
For this article we watched several latest programs of Jim Cramer aired recently and picked 10 stocks he’s bullish about and recommending investors to buy or hold. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 124
A caller recently asked Jim Cramer about a stock that could be a good long-term investment in the chip manufacturing industry as an alternative to Nvidia and wondered whether it’s Intel. Cramer said “that’s AMD” not Intel.
Advanced Micro Devices, Inc. (NASDAQ:AMD) indeed has chances of becoming a competitor to NVDA in the coming months and years. Citi analyst Christopher Danely recently said Advanced Micro Devices, Inc. (NASDAQ:AMD) is using its “annual product cadence” to keep up with Nvidia. Danley has a $176 price target on Advanced Micro Devices, Inc. (NASDAQ:AMD).
Advanced Micro Devices, Inc. (NASDAQ:AMD) is also a strong player in the data center space. Advanced Micro Devices, Inc. (NASDAQ:AMD) has teased 5th Generation Epyc Gen CPUs (codename Turin) and their Instinct MI-300 series GPU accelerators. Advanced Micro Devices, Inc.’s (NASDAQ:AMD) server chips are built on Zen5 core CPU architecture.
Advanced Micro Devices, Inc. (NASDAQ:AMD)’s latest results show a spectacular increase in data center revenue, but a lackluster increase in operating income (+26%) threw water on the enthusiasm around the stock. Advanced Micro Devices, Inc. (NASDAQ:AMD) bears also say the stock’s P/E ratio of over 240 is amongst the highest in the chips industry. Surprisingly, Advanced Micro Devices, Inc.’s (NASDAQ:AMD) forward P/E ratio is about two times higher than Nvidia’s.
Average analyst estimate for Advanced Micro Devices, Inc. (NASDAQ:AMD) is $187.2, which presents an upside potential of 17%. Wall Street analysts expect Advanced Micro Devices, Inc. (NASDAQ:AMD)to grow 32.50% this year and 59% next year. For the next five years the growth will then moderate to 32% on a per-annum basis, which is still high. Based on Advanced Micro Devices, Inc.’s (NASDAQ:AMD) 2025 EPS forecast, the stock is trading at around 28.6X forward P/E ratio, which isn’t high given Advanced Micro Devices, Inc.’s (NASDAQ:AMD) growth trajectory and catalysts.
Meridian Contrarian Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor chip maker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations running on CPUs. We invested in 2018 when it was a mid-cap value stock plagued by many years of underperformance due to lagging technology and lost market hi share versus competitors Intel and Nvidia. Our research identified that changes and investments made by current management under CEO Lisa Su had, over several years, finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel’s. We invested on the the belief that AMD’s valuation at that that time did not reflect the potential for its technology leadership to generate significant market share gains and improved profits. This thesis has been playing out for several years. During the quarter, AMD unveiled more details about its upcoming GPU products for the AI market. The stock reacted positively to expectations that AMD’s GPU servers will be a viable alternative to Nvidia. Although we pared back our exposure to AMD into strength as part of our risk-management practice, we maintained a position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”
Overall, Advanced Micro Devices, Inc. (NASDAQ:AMD) ranks 2nd on Insider Monkey’s list of Jim Cramer is Recommending These 10 Stocks in June. You can visit Jim Cramer is Recommending These 10 Stocks in June to see other stocks in the list. While we acknowledge the potential of Advanced Micro Devices, Inc. (NASDAQ:AMD), our conviction lies in the belief that 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 Advanced Micro Devices, Inc. (NASDAQ: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.
