Transcription
AMD's stocks have gone up about 138% over the past five years or so. But here's the thing, okay? There's really poor sentiment regarding AMD right now. I think it's a tremendous opportunity to be a buyer of AMD right now, but I understand there's a really poor sentiment. Nvidia has destroyed AMD's returns over the past five years, but I do think things are going to flip over the next five years.
The reason being is I look at how Lisa Su has positioned the company, the acquisitions she's made over the last couple of years here, and I think she's actually positioned AMD now to benefit extensively over the next five years. That does not mean Nvidia is going to lose; I just believe over the next five years, AMD's stock price performance is going to far outstrip Nvidia. Nvidia's already seeing a lot of their, you know, fruits of their labor, let's just call it that. AMD has not really; their game is coming up. Nvidia is in their Super Bowl right now, and AMD is going to be playing their Super Bowl over the next few years here.
So there's a difference there you got to understand, right? Additionally, if you look at Jensen, right? Jensen delivered OpenAI their first supercomputer way back in 2016. Elon Musk was there to receive it, right? If we go back to 2016, Lisa Su was trying to stabilize AMD's business model and get them back on the right track. AMD was around a $2 stock if we go back about a decade ago, right? The companies were in a very different place.
So Jensen kind of had a, I don't want to call it an unfair advantage; it was completely a fair advantage, but he had an advantage nonetheless, right? Nvidia really capitalized on that, but Lisa Su has been playing catch-up ever since, and she's done a heck of a job catching up, right? Now they've caught up so much that they're now beating Intel across the board, right? Additionally, I think they're coming for Nvidia next. That does not mean they're going to turn Nvidia into Intel, okay? So don't let's not get too excited about this.
But the way I see her positioning the company, the product lineup, the whole strategy, the acquisitions they've done recently with ZT acquisitions, some of the other acquisitions in the software space, I see them positioning to really get into a serious battle with Nvidia over the next five to ten years. And who's got more to gain out of that battle? There's no question AMD's got way more to gain; Nvidia's got way more to lose, right? Like they're in their Super Bowl right now; they got a lot to lose. AMD's got nothing to lose here that's special.
So I think they're going to be a very formidable competitor over the next many years. Once again, I don't even need AMD to beat Nvidia. Like if AMD just competes well in this marketplace over the next, you know, many years, this is going to go very, very well, right? Now, back to the poor sentiment regarding AMD stock. The reason is this stock hasn't gone anywhere for three and a half years. It's lower today than the stock price was three and a half years ago.
But you got to remember they've done a lot of acquisitions over that time, right? That has diluted shareholder value; there's no debating that, right? So it's something you have to consider when looking at a stock like this. It's somewhat of a reality. Yeah, the stock hasn't gone anywhere for three and a half years, but you also got to keep in mind they've done some major acquisitions that diluted shareholder value. So that's, you know, kind of held down the stock, at least in my opinion, quite a significant way.
But through the ZT deals, CT systems, all these deals they're putting through, once again, Lisa Su has positioned this company for the next 10 to 20 years, and you're going to see a massive payoff, in my opinion, from all these deals that are going through. It's been paying for the shareholder base of AMD that have been in the stock for years and years. But people like myself that have kind of tied this out, right, and are buying the stock very heavily right now, I think we're going to be looking very, very, very well.
Also remember, right? If you look at my best stock in the public count, Tesla, up 2.5%. Remember when I was buying Tesla stock back in the day? Tesla stock hadn't done anything for five years. People said Tesla was going to be dead money forever, right? They had just given up on that stock, and the sentiment could not have been more poor when I was involved in buying Tesla stock back in the day, right?
I think it's worked out okay. Now, that does not mean I expect AMD to return me a 2,500% return over the next, you know, number of years here. But do I think AMD has 3x, 5x, or maybe even 10x potential over the next many years? I do believe that based upon their product lineup and everything they have going on here.
Now, I've been talking a lot about AMD stock recently, including this video I did five days ago. If you need to check out this one, watch this video: "Keep Buying AMD Stock and Don't Stop." It's about a 30-minute video that goes very in-depth into AMD. Check that one out when this video is over here today.
If you want to learn more about AMD, how would you like access to all my best course curriculums? My "Becoming Master of the Stock Market" course, my "Stock Market Investing Mastery" course, my "Stock Options Mastery" course, my "Millionaire Playbook." How would you like access to all my best courses, as well as the ability to have access to my six and seven-figure-plus Discord community, where we're constantly keeping in touch with each other, talking about what's going on in the market?
How would you like exclusive weekly videos from me? How would you like the ability to see what stocks I'm buying and selling in my $2 million-plus Fidelity account? If that all sounds pretty interesting to you, apply to join my private group that is going to be linked in the description area down there. You can click on that, fill out an application, and go ahead and hop on a call with Andre. Andre will walk you through the whole process, he'll walk you through the whole group, and you can go ahead and join us in there. Once again, the link for that is in the description area.
All right, here's the first massive thing that happened on that conference call. This was huge. So Lisa Su is talking about, you know, the data center business and kind of the run rate there, $5 billion, right? She says actually now we're over $5 billion as we go into 2025. I think our guidance will be more at the segment level with some qualitative color as to what's going on between the two businesses.
Relative to your question about long-term growth rates, you're absolutely right. I mean, I believe the demand for AI compute is strong, and we've talked about data center accelerator TAM, total addressable market, upwards of $500 billion by the time we get out to 2028. You know, it's just in a few years from now, folks. I think all the recent data points suggest that there's strong demand out there.
Without guiding into a specific number in 2025, one of the comments that we made is that we see the business growing to tens of billions as we go through the next couple of years. So we're talking about a business that recently has been at about a $5 billion run rate. Now we're talking about in the next couple of years taking it to tens of billions, which tens of billions is anywhere between $20 billion and $90 billion.
So even if it's $20 billion in a couple of years, that's amazing. Let's be very, very crystal clear about that. Never mind if it's $30, $40, $50, or $60 billion; those are just astronomically high numbers. So that right there gives me all the confidence in the world about what's going on here.
But it gets better. The MI350 series is stronger and addresses a broader set of workloads, including inference as well as training. Because you got to understand, MI300 in the market right now, you know, that's getting the ball rolling for AMD. But this is not the Super Bowl time for AMD; this is not the big game. The game starts with MI350, and then when we start talking about the Super Bowl, that's MI400.
When we get into the MI400 series, we see significant, significant traction and excitement around what we can do there with rack scale designs and address the innovation that's going on there. So yes, we're bullish on the business essentially, right? So MI350 is going to be huge for the company.
Additionally, another big thing that happened on the conference call is Lisa Su said MI350 is going to be ready to rock and roll mid-year, right? Which, in my opinion, mid-year is basically saying second quarter. So that should start to ramp in the second quarter. Previously, they talked about MI350 would be ready kind of back half of 2025, which means the revenue story is going to get a lot more exciting on this one starting in the second quarter and then really get exciting in the third quarter and fourth quarter of this year, right?
Keep in mind, we're in the first; this is like the first inning of the game. The really, really huge exciting numbers really come 2026, 2027, 2028, 2029 for this company. This is just like we're about to get the game's about to start. Essentially, the second quarter is when the game starts. We're going to get this first quarter out of the way; like numbers should be fine, cool. But the exciting game starts in the second quarter, and guess what? The second quarter is not that long from now. The second quarter starts in April; it's not that long from now, okay?
This was also very telling what happened on the conference call. This was such a ridiculous question, and this goes to show you how ridiculous Wall Street is around AMD right now, how silly they are. And Stacy Rascon asked this question, and I was kind of disappointed that Stacy even asked it. It was ridiculous. It was toward the end of the call, it was in the last few minutes. I'm listening to this call, and I'm like, why would you even ask that, dude?
He said, "Got it, thanks. And I guess for my follow-up, maybe to follow on there, do you think your exit rate on GPUs in 2025 is higher than your exit rate in 2024? Are you willing to commit to that?" And Lisa Su starts laughing, saying, "AB, you know." Lisa Su tries to be as professional as possible, but it was such a ridiculously silly question that she actually started laughing.
She said, "Absolutely, yes, of course. It would be hard to grow strong double digits otherwise, right? What are you talking about, dude?" I thought that was very telling about how ridiculously silly Wall Street has gotten around AMD stock that they would even ask a question like that. I'm like, and from Stacy Rascon, I was so disappointed in him. I'm like, "Dude, what are you doing? That's like a noob question. Put the numbers together and everything Lisa Su said on the call, all the information she gave you about the business up strong double digits about MI350."
And then to ask that question was so laughable. You know, Lisa Su, like I said, she always tries to keep it professional, but she started laughing at it, and I don't blame her. I was more disappointed than I was like, I thought it was a funny moment. I was just like, this is silly.
Okay, you know, you've seen articles like this today: "AMD a cool down to $100 might be coming." Who cares? Who cares? Send it to $100, send it to $55, send it to $75, send it to $85, send it to $95. Who cares? It's a huge buying opportunity. It doesn't matter; it's irrelevant in the end. Like all this trying to time it out and, you know, "Oh, you know, you're catching a fallen knife." That's fine; it served me very well in the past.
You know, some other stocks I caught some fallen knives on. Meta, I caught a lot of fallen knives on Meta back in 2022. You know, another stock I was buying heavily in 2022 that I caught a lot of fallen knives on was this company named Palantir. Worked out pretty decent. It was another company I caught a lot of fallen knives on; it was this company named Tesla. You ever heard of them before? $2,700 later, it worked out pretty good, right?
Sofi was this company that I remember catching a lot of fallen knives on. I can take you through a whole host of stocks. Amazon, right? You know, you can look at a lot of the best positions in basically almost all the positions in the public count that now have massive gains on them. Basically, all of those stocks were falling knives, and I caught them, and my hands got sliced, and it was all bloody, and it was a big mess. But look how it turned out in the end.
And so here we are with AMD. "Oh, it's a fallen knife; careful, you're catching a fallen knife." Blah, blah, blah. Okay, as business as usual here. Follow some more; I'll catch them all. I'll catch them all. Like it doesn't matter to me; it means nothing, nothing, because of where I believe the stock is going over the next several years.
So send it to whatever price you want to send it to short term. I have doubts; I have major doubts this stock's even going to see $100 or below $100. I will gladly welcome it. Gladly, please go to $100, go under $100, be my guest. I have a lot of doubts because here's the thing, okay? A lot of Wall Street is not very intelligent, yes. But a lot of big money is a little intelligent, and they do do the research work.
And guess what? All those shares that were trying to be sold today, all those people that were done with AMD and they were selling out in the morning, somebody was out there buying those shares left and right, happily, with a smile on their face, and they were gobbling them up. Gobbling them up. And actually, AMD showed a lot of strength as the trade day went along. A lot of strength came back to finish down, what, like 6% or so?
You got to ask yourself, who was gobbling up all those shares that all those sellers that were done with AMD this morning? Who was gobbling them all up? Well, I could tell you one person that was gobbling up some of those shares. It was me. Oh, I gobbled up a few of them, just 325 of them. I'm just a little fish; I'm just a little fish in a big ocean. I'm a little fish in a big, big ocean out there, but you know, saw a few crumbs in that ocean, I gobbled them up.
Okay, and yeah, $335,000-plus move here today on AMD. I did buy a couple of other stocks, which obviously I posted inside my private stock group; they got to see that. But yeah, AMD was the big buy here today. I'm like, you know, send it lower; I'll buy more. Like if it goes lower, I'll buy more lower. But this morning, there was, in my opinion, some very attractive pricing on this stock, and I was very, very happy to be gifted those shares.
Like that's all it was; it was just a gift. Like when you got a company that's this quality as AMD trading the way it was trading this morning with the multi-year outlook this company has and the product roadmap and everything they got going on here, well, it's fine with me. I'll be more than happy to take 325 shares off somebody's hands there.
Now, let me take you through my bull case, base case, bear case for AMD for the next several years. We can call it 2025 to 2028, where I see the stock price going. Okay, here's my bull case. This is the exciting one, right? Which I always think it's actually more interesting to see a bear case from somebody than a bull case because like it's very easy to get excited about a stock that you're buying. But what about the depressing side? What about if it doesn't go good, right? Then what are the numbers, right?
So here's my bull case for AMD. I have them growing revenue on average 35% per year. Now, obviously, they're not going to grow perfectly 35% every single year, right? Some years are going to be faster growth; some years they might grow up toward 40%, 50%, or 60%. Some years might be slower growth. But the moral of the story is under my bull case, I have them growing an average of 35% revenue per year, which puts them in 2028 around $85 billion.
Do I see that being realistic? Even though it's my bull case, I actually see that being pretty realistic given where the data center business alone should be at that particular time. Then we can talk about the client segment, right? The embedded segment should be way stronger by that particular time, right? ZT acquisition will be, you know, long, long done at that time. They're still talking about ZT acquisition should go through likely in the first half of this year, if not maybe in the next few months.
So I think $85 billion is definitely a possibility. It's a bullish possibility, but it's definitely a possibility. Now, net income, because they had a bunch of major one-offs in 2024, net income is going to bounce back really strong on a GAAP basis in 2025. So it should be up like 200%, but then I have it even out at about 45% per year after that, which puts their net income around $26 billion in 2028.
That puts them at net income margins of around 31%, which keep in mind Nvidia has been 50% plus. So even under my bull case, I don't have AMD even being in the same ballpark as Nvidia when it comes to net income margins. Like not even in the same ballpark, and that's fine. I don't need them to be at 50% plus margins. If they do that, great. I don't need them to be there; I don't need them to be at 40%.
Even under my bull scenario at 31%, it's doing really, really well. Now, I put them even for my bullish case; I put them only at a 30 and 35 PE, right? Even though you're talking about a company growing 6x, 7x what an average stock is growing in, I still only put them at 30, 35 PE, which puts the stock in 2028 under my bull case of between about $500 a share and about $575 a share.
This would give a compound annual growth rate of about 45% on the low end, 51% on the high end. 2026, if we look out there, the stock price should be somewhere between $235 and $274. 2027, $341 to $397. So if you're wondering why I went ahead and put $35,000 here today, it's because I believe that $35,000 over the next, you know, 3 or 4 years is going to grow into probably between $100,000 and maybe $175,000 somewhere in there, right? That's why I went ahead and did it.
But what about my base case and my bear case? Now keep in mind my base case is always like the numbers I really like truly, truly expect the most, right? Here's my base case and bear case. So in my base case, I have them grow revenue at an average of 30% per year 2025 through 2028. 190% net income growth in 2025, and then even out to 40% per year on average after that puts them once again at 31% net income margins come 2028, just on a much lower revenue base, right?
$73 billion versus a bull case was around $85 billion, right? $73 billion I think is definitely a doable number for this company given the product roadmap and where they'll be with their CHP cycle at that particular time. Right now, for this one, I took the PE down to 25 to 30, which keep in mind 30 to 40, you know, 30% top line, 40% bottom line is insane growth. Like that's unbelievable growth.
So 25 to 30 is really low PE given those growth rates, but I like, "Oh, it's a chip company; it's just a chip company," blah, blah, blah. Okay, so that puts the stock somewhere between about $358 and $430. It gives me a compound annual growth rate on the low end of 34%, high end 40% for this company. Yeah, that's pretty darn attractive. By the end of next year, that puts the stock somewhere between $183 and $219, right?
So once again, like I can't touch those sorts of, you know, compound annual growth rates over the coming years on the far majority of stocks. So far majority stocks, I cannot touch these compound growth rates. No, in a savings account, I can't touch that, right? Here's my bear case. My bear case is 25% revenue growth on average 2025 to 2028. That would be extremely disappointing for this company. I mean extremely disappointing given how much opportunity there is here over the next, you know, five years to be only growing 25% would be huge underperformance, and Lisa Su would have to take an L on that. That would be bad, okay?
I have them doing around 30% on average net income growth 2026 to 2028, right? Puts them at net income margins of 28% come 2028. A PE ratio of 20 to 25, which puts the stock somewhere between about $221 and $277 come 2028. Now, how could this bear case come true? I think one of two scenarios. One is Lisa Su and the team, they just drop the ball, and they just do a horrible job running the company, right? Their new chips are misses; they have problems, you know, software problems, all types of problems, right?
That's a situation how that could come to fruition, which would not be fun. The other way I could see that coming to fruition is if we had some sort of major recession in the next few years, and that recession caused the big tech companies to pull back substantially on spend, right? And on CapEx because we're going through a big recession at that time. So meaning Google, Meta, Amazon, Microsoft, all the big dogs, you know, they're going through a tough time because the economy is in a big recession. We got unemployment at 8, 10, 12%, and so therefore they all pull back on spend big time.
That's how you get there, right? Some people believe we're not going to have a recession under Trump; you know, that's some people's opinion. And so, you know, if you're of that belief, then that kind of takes that out of it. So then the only way you really get there, right, is Lisa Su and the team just do a horrible job. But I think she's done a pretty damn good job over the last 10 years. Look where this company was 10 years ago; look where it is today.
You know, we were talking about this as a bankruptcy candidate 10 years ago, and now we're talking about, you know, is this company going to become a trillion-dollar market cap someday, right? That's the debate around AMD now. So the moral of the story is here, yeah, AMD, AMD, let's go, baby!
Okay, how would you like access to all my best course curriculums? My "Becoming Master of the Stock Market" course, my "Stock Market Investing Mastery" course, my "Stock Options Mastery" course, my "Millionaire Playbook." How would you like access to all my best courses, as well as the ability to have access to my six and seven-figure-plus Discord community, where we're constantly keeping in touch with each other, talking about what's going on in the market?
How would you like exclusive weekly videos from me? How would you like the ability to see what stocks I'm buying and selling in my $2 million-plus Fidelity account? If that all sounds pretty interesting to you, apply to join my private group that is going to be linked in the description area down there. You can click on that, fill out an application, and go ahead and hop on a call with Andre. Andre will walk you through the whole process, he'll walk you through the whole group, and you can go ahead and join us in there. Once again, the link for that is in the description area.
S&P price target of 6500. We are happy to welcome back Mike Wilson to Squawk Box. He is Chief Investment Chief US Equity Strategist for Morgan Stanley, and it's great to see you after quite some time. Nice to see you, sir.
Yeah, good morning. So you think the next couple of months are choppy? Does that mean don't do anything and wait for some kind of dip based on the sort of longer-term arc you've got going?
Not at all. I mean, look, we made that call back in November, December, just saying we priced a lot. 6100 was kind of our short-term target, and look, there's a lot of news coming out. We think the growth, the policies initially are sort of growth negative, which is, you know, immigration sort of enforcement and, of course, the tariffs. That's just a lot of noise, so we're just digesting that, playing to do underneath the surface.
I mean, financials have been phenomenal. We've seen it broadening out to some degree. In fact, you know, software over semiconductors has been a great trade for us because as software over semiconductor, because diffusion of tech now and the application layers being built out, we think that got confirmed a bit with the Deep Seek announcement.
So do you think that the semiconductor game is taking a pause, or it's over, or what?
Well, it has taken a pause. I mean, I know it's taken a pause, but is it forever a pause? Of course not. I mean, it's a cyclical group, and look away from the AI beneficiaries within. I mean, CapEx has been pretty weak for most other semiconductor types spending, right? And of course, now this with this Deep Seek potentially leading to the next exciting part of AI, which is the diffusion of it and application layer, that's the opportunity is going back into the software stack.
Mike, there was a time where you were worried about, I think, earnings, which could forecast a slowdown in the economy that could have been the R.W. Could have been a recession that never happened.
That's right. Is it, can we have we learned to manage the economic cycle where it doesn't have to? Are we closer to it happening now because it didn't happen, or does it not have to happen unless there's a mistake?
Well, I think a couple of things happened last year. What we missed is, I mean, we didn't miss it; we actually called for it, which is a rolling recession. I mean, we've had recessions in many, many industries. If you think about the last two years, we've been in a recession in housing, in autos, in manufacturing, in consumer goods. A good part of the economy has been.
So we're not closer to that inevitable day of reckoning for something happening. No, I mean, I will say this: I think what could be interesting this year is you could have a recession in government, right? If you have a recession in government, that may actually cause unemployment to go up to a level C of recession, but it may not be that bad, Joe, for the rest of the economy because they've already been in sort of this soft recession.
So that's actually our bull case, is that the government shrinks, you know, the crowding out stops, it allows the Fed to cut rates at some point, and the broadening out can actually happen. A lot, a lot to happen between here and there, but that is actually the bull case.
God, that was like a symphony to me. But what you just described is it, and you think that's possible at Morgan?
Well, I think they're working on it. I mean, you know, probably the most underestimated part of the administration is Doge. I mean, I think there's a lot of skepticism around this, but the reality is that's possibly the most bullish thing that could happen. If you could shrink the government in a way that it's the end of the free world in a constitutional crisis, I just heard Chris Murphy say that to me.
I mean, I'm scared beyond belief. I'm scared to where there's nothing in my intestines.
Well, I mean, it's the most exciting thing I've heard in a while. Remember in the 1990s, we had this great bull market. Now, the thing that really sparked that, in my view, was the budget deal that happened in '90 before, okay? Now, I'm not sure we can get to that kind of a, you know, a balanced budget, but if we can make progress on that, it liberates the private economy. That's crowding out.
That mentioned 100% interesting. I mean, that is a contrarian take, I think.
Is it? Why is that a contrarian take? You've been giving me the other side all morning or giving us.
No, no, that's the contrarian take on the Doge could end up being a complete almost a spring-loading effect for the overall economy. It's not what most people are thinking; that's what you're...
I think most people are very skeptical, investors very skeptical because, look, it's hard to do.
What do you think the ultimate number is that has to get taken out for that to happen?
We just need to freeze spending. We don't need to really cut a lot of spending. We're running so far above trend on actual expenditures. Let's just freeze it or at least slow it down. I mean, we're growing at a much faster rate than the economy is growing. That's the crowding out feature, which, by the way, has kept rates higher than they probably would have been otherwise.
That's why the long end is running up, and if we don't do something immediately, that will be the problem that pops up.
That's right. The back half of last year, we saw rates actually start to move up, and that was our call why we thought 6100 was doable is that, you know, Republican win, a Trump win was positive for growth but maybe not so great for rates. But now the market is kind of second-guessing that and saying, "Well, maybe they can be successful here." We just don't know, and it's going to be messy.
That's why we think it's going to be choppy for another three or four, five months because we don't know the answer to this.
But this is the direction they're going, right?
Is there places you would stay away from right now?
Well, I think I still think low-quality businesses are under a lot of... low-quality businesses are always under pressure.
Not always. I mean, remember in 2021 when inflation was accelerating? Those, you think anything would move, right? They did phenomenally well, and we saw a little bit of low-quality work in the fall when there was a grab for risk.
So in fact, if you go back to last summer, right, we were basically recession fears were kind of rampant, and then the Fed cut rates, basis points. Low-quality did really, really well in the fall.
And so I think that takes a backseat again, so we're avoiding that type of stuff.
Yeah, I don't know if... was it one question related to your semiconductor view on the pause? Does that also extend to data centers in real estate?
Well, look, there's an AI CapEx deceleration going on. That's not negative growth in CapEx; it's deceleration. But stocks live at the margin, right? They live in the second derivative, and that's what I think that's potentially what's been weighing on space, whether it's, you know, data centers, electricity, you know, utilities, things like that to get a little overcooked.
That creates opportunity in other areas like financials, where money had to move big liquid groups.
So, you know, yeah, I don't know if I completely buy that, but a lot of his sentiment I definitely agreed with there. Overall financials, the other thing I was kind of like, I don't know about that. I don't know if I love playing financials here.
You know, could definitely have some major rate adjustments. Maybe if you look out 6, 12 months from now, not in the short term, but maybe if you look out 6, 12 months.
And also, I just don't know if I love financials at this stage in the economic cycle, right? Like I think financials are more enticing, exciting play when you're coming out of a recession, when you're coming out of some sort of really bad economic time.
I think that's when financials can be pretty exciting. So I think, you know, if you were getting into financials, let's call it in the back half of 2020 after we went through, obviously, the Rona crash and whatnot, I think that was probably a compelling time to get involved in a lot of those stocks.
Additionally, I think coming out of the great financial crisis, I think that was a very compelling time to get in a lot of those stocks. So you have certain time periods where I think financials are really attractive from a multi-year perspective, like where you can play them for three, five, maybe even seven years.
I don't love them now, though. You know, because I kind of feel like I almost feel like you would have to do it more as a trade than an actual investment.