According to Jim Cramer, AMD stock is a buy due to Intel's CEO shakeup

Intel shares rose on Monday after the chipmaker announced out of the blue that CEO Pat Gelsinger had retired. But the real winner from the restructuring is its main competitor, Advanced Micro Devices. Since Lisa Su took over as CEO in 2014, AMD has both contributed to Intel’s competitive pressures and capitalized on its missteps. And the club holding company should continue to benefit from Intel’s problems, including the leadership change, Jim Cramer said Monday. Intel CFO David Zinsner and Intel Products CEO MJ Holthaus will serve as interim co-CEOs. “It won’t help Intel,” Jim said. “It will only help AMD. That’s why I think you should buy AMD,” he said at the morning meeting. Of course, we can’t increase our position due to our restrictions, which prevent the club from trading a stock for 72 hours after Jim mentions it on CNBC. Gelsinger’s departure caps a tumultuous, nearly four-year tenure at the iconic American chipmaker, which was already falling behind rivals and struggling with execution problems before his arrival in early 2021. The turnaround did not go as hoped. Instead, with Gelsinger at the helm, Intel experienced continued losses in market share and share price. Gelsinger’s expensive bet to set up a third-party production company has not yet paid off financially. Intel has also struggled to ride the wave of artificial intelligence that has made dominant AI chip maker Nvidia, a longtime club holding company, one of the world’s most valuable companies. AMD’s emerging AI business, in turn, is gaining traction, even if it is still dwarfed by Nvidia. In the data center server and personal computer markets, Intel and AMD have historically competed most directly. Intel, a pioneering company in the creation of Silicon Valley, has long been the largest player in both of these markets. AMD was believed to be on the verge of bankruptcy when Su took over the company in 2014. It eventually patched itself up by releasing more competitive products in a timely manner, which helped AMD take over Intel’s lead in servers and PCs. AMD has been the clear winner in recent years, especially in the lucrative server market. The financials tell the story: Intel’s data center unit generated $25.8 billion in revenue in 2021, the year Gelsinger took over. According to FactSet, Wall Street currently expects its revenue in 2024, including AI processors, to be around $12.81 billion, a dramatic decline in just a few years. On the other hand, AMD’s data center sales contributed almost 20% of its total sales of $16.4 billion in 2021 – without giving exact figures. Hypothetically, at 25% of sales, that would equate to $4.1 billion. AMD’s data center business, including AI chips, is expected to be about the same size as Intel’s this year at $12.88 billion, according to FactSet. “Every billion dollars that Intel gives away in data center market share represents up to 40 cents in profits for AMD, and probably more,” Ben Reitzes, an analyst at Melius Research, said on CNBC on Monday. “AMD has been gaining market share anyway and will continue to do well. And that could be a big gift for them if this (dynamic) continues.” Reitzes said AMD shares should be higher following Gelsinger’s departure, and in fact they rose more than 3% to around in Monday’s session $142 each. Still, the stock is down about 3% in 2024. Shares of Intel rose more than 4% on Monday, despite falling about 49% since the start of the year. Both stocks underperformed the broader semiconductor group in 2024, with a closely followed index for the industry gaining over 21% in that period. Intel’s subpar performance makes sense. It’s more frustrating for AMD. AMD is “winning big business,” Jim said. “It’s No. 2 (in AI chips)). It wins the server business. The PC business wins. “What do people want?” He acknowledged that one culprit could be what appears to be a slow start to the “AI PC” upgrade cycle. But he said investors shouldn’t wave the white flag down here. “I think the AI PC theme is a work in progress,” he said. Intel’s already complicated path has become even more uncertain. AMD’s foundation for future success has become even clearer. (Jim Cramer’s Charitable Trust consists of AMD and NVDA. A complete list of stocks can be found here.) As a subscriber to 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 foundation’s portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE INVESTING CLUB INFORMATION SET FORTH ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. THERE ARE NO fiduciary duty or duty IN RECEIVING YOUR INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.

Lisa Su, Chairman and CEO of Advanced Micro Devices Inc. (AMD), during the AMD Advancing AI event in San Jose, California, U.S., on Wednesday, December 6, 2023. Advanced Micro Devices Inc. introduced new so-called Accelerator chips said to be able to run artificial intelligence software faster than competing products. Photographer: David Paul Morris/Bloomberg via Getty Images

David Paul Morris | Bloomberg | Getty Images

Intel Shares rose on Monday after the chipmaker announced out of the blue that CEO Pat Gelsinger had retired. But the real winner from the restructuring is its main rival Advanced micro devices.

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According to Jim Cramer, AMD stock is a buy due to Intel’s CEO shakeup

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