Cramer’s "Morning Meeting": AMD’s AI Boom, DuPont’s Split, and the Fed’s Impact on Tech
The CNBC Investing Club with Jim Cramer kicked off its Wednesday "Morning Meeting" livestream with a focus on artificial intelligence (AI), the Federal Reserve’s upcoming interest rate decision, and DuPont’s surprising stock performance. While the market remained poised for the Fed’s decision, Cramer highlighted the ongoing AI revolution and its impact on certain tech companies, particularly Advanced Micro Devices (AMD) and Nvidia.
Key Takeaways:
- AI is driving a tech rally: Despite the Fed’s potential rate cuts, Cramer believes tech giants are set to thrive, particularly those heavily invested in AI development.
- AMD’s MI300 chip is in high demand: The chipmaker’s robust sales and raised full-year outlook underscore the fierce demand for its AI chips, creating a supply-constrained market.
- DuPont’s split could unlock value: The company’s strong second-quarter results and better-than-expected guidance for the third quarter suggest its impending split into three separate companies could unlock significant value, especially for its water business.
- Rate cuts may not benefit tech: While investors often anticipate a surge in tech stocks following rate cuts, Cramer argues that big tech companies may not see substantial gains because they are already performing well due to AI advancements.
AI Fuels Tech’s Resilience Amidst Rate Uncertainty
Cramer’s "Morning Meeting" started with an optimistic outlook on the tech sector, even as the market waits for the Fed’s interest rate decision. Despite the possibility of rate cuts, Cramer remains confident in owning the tech titans, believing they are well-positioned to benefit from the ongoing AI revolution.
"I’m still in favor of owning the tech titans, even though they don’t benefit when the Fed eventually decides to cut rates," Cramer said. This unwavering support stems from the strong AI revenue streams and continuous investment in AI infrastructure by major tech companies.
"At least in the interim, we’re seeing a relief rally within tech on the notion that AI revenue is still strong and mega-cap tech companies are still spending on their AI buildouts," Cramer added. This positive sentiment was evident in the strong performance of big tech names on Wednesday, reflecting the market’s growing confidence in the long-term potential of AI.
AMD’s AI Chip Shortage Drives Strong Performance
Advanced Micro Devices (AMD) has emerged as a key beneficiary of the AI boom. The company’s robust demand for its MI300 AI chips has led to a significant increase in sales and a raised full-year outlook, solidifying its position as a key player in the AI hardware market.
"AMD CEO Lisa Su told Cramer in a CNBC interview that there’s a shortage of computing power," highlighting the immense thirst for AMD’s advanced chips. This demand is driving the company’s exceptional growth, with the MI300 chips being "the fastest ramping product in the company’s history."
However, despite its strong performance, Cramer believes AMD’s stock should be "much, much higher." This sentiment reflects the market’s continued focus on "companies that benefit from lower rates," a factor that could hinder AMD’s further rally.
DuPont’s Split: A Value Catalyst for the Water Business
DuPont, a diversified chemical company, reported strong second-quarter results, exceeding analysts’ expectations and raising its full-year estimates. This positive performance sent the stock soaring on Wednesday, prompting Cramer to express surprise at the relatively modest gain.
"We’re surprised the stock isn’t up even more after management guided better-than-expected results for Q3 while raising full-year estimates," Cramer noted. He believes the stock’s potential for even greater growth lies in its impending split into three separate companies.
"We believe the water business will be worth more when the company splits," Cramer stated, suggesting that the water segment could become a highly valuable entity in its own right. He even predicts "the water company will be purchased for a much bigger price than it’s currently selling."
"A $35 billion company could be worth $50 billion frankly when this is finished," Cramer asserted, highlighting the significant value that could be unlocked through the split. This potential acquisition scenario presents an attractive opportunity for investors seeking growth in the water infrastructure sector.
The Fed’s Rate Decision: A Minor Impact on Tech’s Growth?
While the Fed’s rate decision remains a major market event, Cramer believes it may not significantly impact the performance of big tech companies.
"Rate cuts won’t impact big tech stocks that much," Cramer said, emphasizing their current growth trajectory driven by AI advancements. Despite the potential for a rate cut, Cramer remains optimistic about the tech sector’s long-term prospects, driven by the increasing demand for AI technology.
In conclusion, Cramer’s "Morning Meeting" provided a glimpse into the evolving tech landscape, emphasizing the role of AI in driving growth and shaping market dynamics. While rate cuts remain a subject of speculation, it is the ongoing AI revolution and the potential for significant gains from companies like AMD and DuPont that are shaping the market’s trajectory.
