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AMD Stock Is Stuck Between Cloud and Artificial Intelligence and This Time Buy the Dip Won't Work

Austin Smith

Published: February 12, 2025 9:28 am

24/7 Wall St. Key Points:

• Cloud computing growth has slowed significantly for Microsoft Corp. (NASDAQ: MSFT), Amazon.com Inc. (NASDAQ: AMZN), and Alphabet Inc. (NASDAQ: GOOG), raising concerns about their earnings momentum.
• The AI boom is still in its early stages, but massive investment costs, power constraints, and increasing competition may delay profitability.
• If Nvidia Corp. (NASDAQ: NVDA) reports weaker-than-expected earnings, it could trigger a broad selloff in AI and cloud-related stocks.
• Also: Are you ahead, or behind on retirement? Click here to take a quick quiz and see for yourself. (sponsored)

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Transcript:

[00:00:04] Doug McIntyre: So far the surprise to me, this earnings season is that cloud computing is slowing the growth in cloud computing has dropped off. And if you take several companies, certainly Microsoft. Certainly Amazon Web Services and Google to a slightly lesser extent. Google, it’s, that’s not as good a business as it used to be, and for those companies to hold up before AI, if it ever does starts to kick into earnings a lot. That’s a problem for these companies. They needed that to have good earnings.

[00:00:42] Lee Jackson: Yeah, and we, talked about this recently, that, they’re starting to hit a saturation point where most of the clients in the big mega clients that are either at AWS or at Microsoft and Azure, they’re taken.

[00:00:58] Lee Jackson: a small client for those guys just doesn’t move the needle at all. And I think it’s going to be very interesting to see how this is going to play out. And, of course, the Google CEOs was just like, well, we’re going to throw more money at AI. And I’m like, okay, but I mean. Is that going to help your business to business business and, Microsoft had the same issues?

[00:01:25] Doug McIntyre: Well, I think this is the, story they want us to believe. As cloud computing becomes less attractive to investors, all these billions of dollars that they put into AI will start to have a return. Now, if you’re an investor, you’re going to get caught in a trap. Cloud is going to continue to slide.

[00:01:48] Doug McIntyre: And the AI thing is something where they’ve all gotten out over their skis. There’s been a way too much money. There’s not enough electricity. They’re trying to be, build these server farms. That is a high wall to climb a very high wall client. So without cloud, AI has to work and it’s, not going to, it’s not going to work soon enough so that it’s going to sort of cross and say, okay, cloud became crummy and AI became awesome.

[00:02:16] Doug McIntyre: Not going to happen.

[00:02:18] Lee Jackson: Well, that’s true. And it’s almost like, I remember initially everything kind of early on, everything migrated to software as a service. Okay. And then everything said, okay, not that. Let’s migrate to the cloud. Let’s do a little cloud computing. Now it’s like AI cloud computing, but via huge data farms.

[00:02:41] Lee Jackson: And it’s like, okay, now what’s going to be the standard for enterprise? And is that standard going to constantly change? Will the target move? And they have but, it’s going to be to see if, the slower Wall Street is very..

[00:03:05] Doug McIntyre: These three companies are sells right now. Amazon, Alphabet, and Microsoft. Their cloud services are growing too slowly, your AI businesses may never miss.

[00:03:19] Doug McIntyre: Listen, there’s no guarantee with deep seek and you’re going to know, India is going to have a DeepSeek and this stuff is going to come out of the walls because that lock has now been picked a bunch of times. I’d give me if they stole stuff from open AI, that’s tough luck. it’s still out.

[00:03:36] Doug McIntyre: And if it’s free,

[00:03:39] Lee Jackson: It’s interesting how Musk and Sam Altman have like, it’s turned into this ongoing battle that, I mean, Oh, profit or not profit. How does anyone monetize that?

[00:03:50] Doug McIntyre: Those companies are sales for two reasons. The first one is what I just said. It’s loud, slow. AI not gonna come yet. The other thing is if the market tanks, those stocks tank more, okay?

[00:04:04] Doug McIntyre: They’re, the stocks will drag the market down. Alright? So if you’re investing in these companies, you’ve gotta say business models. Starting to get broken. If the market falls, they lead it down. So if you put those two things together, they’re extremely risky investments at this level.

[00:04:25] Lee Jackson: Well, and the magnificent seven, there was a day, I think it was last week, where all seven of them were down on the same day.

[00:04:32] Lee Jackson: All seven, not two, not three, not four, all of them. And they led the market higher for two years. I understand that. 20 percent plus growth in 500 in 23 and 24. And the majority of the reason that it was higher is that they were, 59 percent of the market cap or whatever it is. It’s ridiculous.

[00:04:53] Lee Jackson: And the thing is that they’ve run so far.

[00:04:56] Doug McIntyre: Yeah, listen, in my opinion, those companies, from a stock market perspective, have burned themselves out. And if NVIDIA’s weak at all, it basically says everybody’s weak. There’s everybody who got on the AI bandwagon. If NVIDIA has poor earnings, I gotta tell you something, that’s like a hand grenade.

[00:05:17] Doug McIntyre: You don’t have good numbers out of NVIDIA, you might as well throw a hand grenade right in the middle of all of them.

[00:05:23] Lee Jackson: Absolutely. Absolutely. And and in video, it took a big dip during the deep sink day and, it should, and through some of these other days, but of course, there’s going to be a day and, I don’t know what it’s going to be.

[00:05:40] Lee Jackson: And of course, you and I, we don’t want our viewers to think that we’re just negative on the stock market. We’ve been around for a long, time, and we both know that the stock market goes at a 45 degree angle over time. Yeah. But it’s gonna hit a pothole here at some point, and I don’t think it’s gonna be like 99 in 2000 and 2001 where it was really bad, but yeah, they’re gonna lead the market down and there’s gonna be a time when buy the dip doesn’t work.