Important points
CNBC’s Jim Cramer argued for a downgrade for Advanced Micro Devices, saying the stock still has significant upside potential as demand for its chips continues to soar. “Advanced Micro has the CPU, and the CPU is what the agents are using,” Cramer said Monday during the CNBC Investing Club morning session, which provided a daily breakdown of the market’s biggest stories. “So if you have them, this stock is going to go up even more.”The race to build data centers and deploy more complex AI systems, called agent AI, that can complete tasks with limited supervision has created a feverish demand for central processing units (CPUs). The need for processing power is exploding faster than manufacturers can keep up. AMD makes both CPUs and another type of chip used for AI computing called GPUs, short for graphics processing units. In particular, with the advent of agent systems, CPUs are even more coveted today than they were in the early stages of the AI spending boom. Cramer’s comments came after HSBC downgraded AMD’s rating from “buy” to “hold.” Semiconductor analysts at the company said that while demand remains strong, AMD may struggle to exceed already heightened expectations for server CPU growth. They argued that AMD’s recent stock price gains factor in much of that optimism. AMD stock fell more than 4% on Monday, but is still up about 58% over the past month. The company also said the downgrade could limit AMD’s ability to fully capitalize on demand due to its reliance on Taiwan Semiconductor Manufacturing as a manufacturing partner. TMSC has limited capacity to mass produce more advanced chips. In contrast, analysts noted that Intel, AMD’s longtime rival in the data center CPU market, operates its own chip-making foundry. This puts Intel in a good position to deliver the “upside surprises” that investors like in the coming quarters, they said. HSBC maintains a Buy rating on Intel stock. Cramer dismissed concerns about AMD, arguing that supply constraints are actually driving demand and pricing power, reinforcing the broader imbalances that underpin stock performance. Cramer said he has “no intention of selling” AMD stock. AMD will report first-quarter earnings after the close of trading on Tuesday. Cramer’s Charitable Trust, a portfolio used by CNBC Investing Club, currently owns no AMD stock. In the chip space, it owns Nvidia, Broadcom, and Arm Holdings.
