Why am I buying GOOG and AMD?

If you are thinking, “Mark over the last few months you have stated a desire to switch your portfolio to a purely ETF approach…

You would be correct!

The next thought might be “You even created an entire blog post on doing that very thing”

You would still be correct.

However, I still believe that every once in awhile companies are listed at outrageous discounts. When this happens it almost seems foolish to not take advantage of the situation. Yes a big part of this is me missing out on the insane rallies beginning in the fall of 2022 after the wild sell downs since January 2022.

FOMO

The one I did pick up was Shopify and it has been my best performer of all time.

So to be more precise I am less interested in choosing individual stocks in the Dividend Growth category as there are plenty of ETFs that have low fees and solid dividend growth in that space. I will continue to lean heavily into VDY and SCHD with a small amount of XEI.

One last thing before I dive into the specifics It is important for me to call out that I am planning on keeping these positions relatively small and I will slowly build them overtime.

GOOG

Google has had a few curveballs thrown its way over the past year or so all of which have led it to underperform its peers. Specifically:

• Meta in the advertising space
• Amazon in services space

Firstly the wild boom in Generative AI and LLMs making many people questions whether Google’s search will be relevant in the coming years. Personally I think if it isn’t relative in its current state they will adapt it until it is.

• They have already started to do this by adding Gemini’s AI overview at the top of the page once you execute a search.

Second one that comes to mind was the Gemini Demo in August of 2024 where the presenter was asking Gemini to check their calendar to see if they were free for a concert. It failed twice before correctly stating that he was free. This was not a good look and led to a ton of speculation and nay sayers.

• The thing is this is a quickly expanding space and at time of writing there are about a half dozen versions / models of Gemini that is an easy add-on for any existing g-suite customers to add for their employees

Finally there is the anti-trust suits against the company that is also causing uncertainty.

So as we can see there is plenty of FUD around Google but the fact remains that it is large company with many growth avenues ahead of it with $140 Billion cash on hand. Some of this cash ($32 Billion) is looking to be allocated for the purchase the cloud security firm Wiz in an all-cash transaction. Thus shoring up one of its known weaknesses and getting Wiz’s book of business which includes selling to Googles competition.

This transaction is larger than all of Google’s previous purchases added together and one that some think is on the expensive side at a 45x value multiple.Fingers crossed this acquisition will go the regulator bodies.

GOOG Earnings Call Q4 2024

• Revenue up 12%
  • pretty solid but unfortunately much lower than META’s 20% (which is arguably its top competitor in the advertisement space)
• Net Income up $6billion year over year (20.6 to 26.6)
• Diluted EPS $2.15 vs 1.64 year over year
• Announced $75 billion in capital expenditure for 2025, market expected $58 billion which likely hindered stock price appreciation short term
  • I see this as a win for NVIDIA and AMD (my bet)

Personally I believe the future is bright over the medium to long term and am looking forward to being correct 😉

AMD

AMD has a relatively low valuation compared to its peers and stock price wise it hasn’t done much in a few years. Looking at the 5 year chart it has underperformed QQQ

• AMD up 135%
• QQQ up 161.5%

What AMD has been is an innovation machine with all of the different chips being pumped out.

Another notable callout is that AMD has other branches and I’m sure their hyperfocused CEO Lisa Siu will get them all on track. We will discuss each branches’ performance later in the earnings call section.

On the gaming side even if NVIDIA / INTEL combo is slightly better than AMD / AMD the huge cost discrepancy is not worth it for the majority of folks. I feel like I can say this as someone who built their first PC a few years back and opted for AMD Ryzen and a 5700XT setup otherwise I would have blown my entire budget on the CPU and GPU alone.

I believe people have forgotten what a phenomenal brand AMD is. Of course NVIDIA is the more prestigious at the moment and they have had an incredible run. Sure NVIDIA will likely remain dominant in generative AI and the training side of things and that’s fine.

The focus has been changing from training generative AI to inference (“reasoning”) models and there has been some evidence that AMD models may be slightly better at inference. The reason for this is that they have superior memory bandwidth and latency capabilities.

The general consensus is that generative will continue to be dominated by NVIDIA and we will see AMD become more attractive as inference demand increases. Don’t get me wrong I believe NVIDIA will still do well, but, I also believe AMD has a lot more upside and thus is my bet. Scale wise mos experts agree that vastly more compute will be required in this “inference era” if we can call it that.

While AMD is definitely catching up in terms of hardware the next big hurdle will be on the software side. Previous acquisitions of Nod.ai and silo.ai have helped with this and hopefully ZT Systems will soon close to help AMD close the gap.

Opinions, thoughts and feelings are great but we better take a look at the numbers!

AMD Earnings Call Q4 2024

• Revenue $7.7billion 24% year over year
  • This occurred predominantly in Data Center and Client
  • Full year revenue went from $22.7 billion to $25.8 billion which is 14% y/y
    • near 30% coming from this quarter
• Gross margin up 4% in both GAAP and NON-GAAP both are now above 50%
• NON-GAAP EPS $0.77 to $1.09 y/y
• One Offs Dragging the Stock
  • $186 million in restructuring charges
  • $419 million Income Tax Provisions vs $297million benefit Q4 23
• Commentary around Data Centers:
  • Strong growth in public cloud deployments through MFST, GOOG, AWS, Tencent, and Alibaba
  • Powers 5 of 10 fastest supercomputers globally
  • Powers 15 or 25 most energy efficient supercomputers globally
• Client Segment is the most impressive and AMD is definitely capitalizing on the tough times at Intel:
  • Q4 Revenue from $1.5 billion to $2.3 billion which is up 58% y/y
  • Q4 margin from 4% to 19% y/y
• Gaming Segment was disastrous
  • Q4 revenue Down 59% y/y
  • Q4 margin went from 16% to 9%
• Embedded
  • Q4 revenue down 13% y/y
  • Q4 margin went from 44% to 39%
• Forward looking
  • Q1 2025 Revenue guidance at $7.1 billion +/- 300 million
    • analysts were predicting just under $7 billion

Unfortunately I cannot predict the future but based on what we discussed I believe that there is far more upside in GOOD and AMD then there is in the indicies at the moment. Therefore I am sticking to these bets and will likely continue to add to them. If you are curious as to how much you will have to join me back here next week with March’s Portfolio Update!

Thanks for stopping by and I hope to see you back here next week!

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Cheers ☕