AI portfolio with $4.9 billion in cash

Advanced Micro Devices (AMD) was in the news, driving a strong rally in US stocks during afternoon trading. The chipmaker’s share price rose following the acquisition of ZT Systems, a move that significantly strengthens AMD’s artificial intelligence capabilities. This positive news helped maintain last week’s bullish trend amid upbeat economic indicators.

The broader market reflected this optimism, with the Dow Jones, S&P 500 and Nasdaq indexes posting significant gains. While AMD led the tech sector's advance, other stocks also saw notable moves. McDonald's shares soared after Evercore ISI issued upbeat predictions, expressing increased confidence in the fast-food chain's U.S. business. The company's stock rose nearly 25% after the introduction of close positioning and cutting-edge technology, which reinforced its business circle's commitment to the Ilera deal.

FuboTV also experienced a boom, becoming one of the best performers after favorable legal proceedings against direct competitors such as Walt Disney, Fox and Warner Bros. This court ruling positions FuboTV as a major competitor in sports streaming.

However, not all stocks benefited from the day’s gains. Morgan Stanley faced a drop in its share price following a rating downgrade, suggesting potential weaknesses in its stock’s performance. Similarly, HP missed out on the rally after Morgan Stanley downgraded its stock, citing concerns about the iBuying platform as a potential headwind.

Despite these individual setbacks, AMD's strong performance helped drive the broader market higher, underscoring the technology sector's continued influence on broader market trends.

AMD to acquire ZT Systems for $4.9 billion

On August 19, 2024, AMD (NasdaqAMD took a bold step into the field of artificial intelligence by announcing the $4.9 billion acquisition of ZT Systems, a leading provider of ai infrastructure for large-scale computing enterprises. This strategic purchase aims to enhance AMD's product line ai.asp”>ai-NVIDIA-centric chips and hardware, strengthening its competitive position against Nvidia and strengthening its position in the developer market.

The deal structure reflects AMD's financial stability and commitment to technological advancement: 75% of the acquisition will be covered by cash and the remaining 25% by new stock. AMD's strong balance sheet, with $5.34 billion in cash and short-term investments at the end of the second quarter, positions the company well to handle this significant investment.

ZT Systems, a private company with around 2,500 employees and an annual turnover of around 10 billion dollars, brings valuable assets to AMD. Particularly noteworthy are the 1,000 engineers that AMD plans to retain, which will significantly increase its technical capabilities.

The acquisition leverages ZT Systems’ extensive experience in cloud computing, which AMD plans to use to empower enterprise and cloud customers. This will enable the efficient deployment of a revolutionary ai infrastructure across all software, systems and hardware components at scale.

As part of the deal, ZT CEO Frank Zhang will join AMD and report directly to AMD’s head of data center. This move ensures the continuity and integration of ZT Systems’ leadership and expertise within AMD’s existing structure.

AMD expects the merger to close in mid-2025 and expects ZT Systems to have a positive impact on the company’s performance over the next 12 to 18 months. This acquisition marks a crucial step in AMD’s strategy to assert its leadership in ai training and inference solutions, consolidating its position in the rapidly evolving field of artificial intelligence.

Revenue growth forecast

A company's financial health is best measured by its earnings growth, but this alone is not enough for long-term sustainability. Revenue growth is equally crucial, as earnings growth without corresponding increases in revenue is unsustainable in the long term. Therefore, it is essential to understand a company's revenue growth potential.

In AMD's case, current projections paint a promising picture:

For the current quarter, the consensus sales estimate is $6.71 billion, indicating year-over-year growth of 15.7%. Looking ahead, estimates for the current and next fiscal years are $32.18 billion and $25.51 billion respectively, representing growth rates of 26.1% and 12.5%.

AMD's recent performance supports these positive projections. In the quarter ended September 30, the company reported revenues of $5.84 billion, up 8.9% year over year. This figure surpassed the Zacks Consensus Estimate of $5.71 billion by 2.2%. Similarly, reported earnings per share (EPS) of $0.69 beat both the year-ago $0.58 and the consensus estimate, delivering a positive surprise of 2.99%.

McDonald's Returns: Redefining Value by 2025

Known as the fast-food giant, much like the Golden Arches, with a global distribution reach, McDonald's (MCD) is on the verge of a major comeback, as confirmed by Evercore ISI analyst David Palmer. The outlook for McDonald's U.S. business for the upcoming year 2025 has become much brighter due to its recent successful market share gains, which Palmer predicts will continue through 2024.

McDonald's hasn't always had a smooth ride, however. The company is adjusting to an extremely competitive market environment in which people are less willing to spend money at restaurants. Plans for the revamped 2025 target emphasize recreating value by increasing the number of new meals in the low-price category and adding new menu items in the mid- and premium-price ranges, a move that will be used to appeal to a variety of customer segments.

Palmer raised his price target on McDonald's stock to $320, reflecting his renewed confidence in the company. This positive outlook comes despite recent challenges. On Monday, McDonald's closed at $287.55. The company reported a 0.7% decline in U.S. same-store sales in the second quarter. This was its first decline in 16 quarters. However, strong digital and delivery growth provided a silver lining. These gains offset some of the downturn and demonstrated the company's resilience during a difficult period.

Until next month, the $5 offer for McDonald's menu will also remain. This is its strategy to relaunch the brand's once famous Value concept through the Dollar Menu. However, the future ahead will not be so easy, as consumers around the world are opting for healthier options and luxury dining experiences offered by competitors such as Chipotle, Wingstop and Shake Shack.

fuboTV up 33% vs. Disney, Fox and Warner Brothers Discovery

On Tuesday, fuboTV Inc (FUBO) shares rose an impressive 33%. This followed a significant lead over major industry players such as DisneyFox and Warner Brothers Discovery. Specifically, the victory came in the form of a preliminary injunction issued by U.S. District Judge Margaret Garnett. As a result, these companies were prevented from launching their long-awaited sports-focused virtual multichannel video programming distribution (vMVPD) service, Venu.

The decision was also a major victory for fuboTV. In fact, Needham & Company estimated that there is a 75% chance that Venu will be fired.

The prediction is driven by two main factors: Venu's failure to make it to the NFL and potential anti-competitive behavior due to the monopolistic nature of the joint venture. The current market response, particularly from major players, underscores the importance of this lawsuit. It not only improves fuboTV's position, but also raises concerns about the future competitiveness of the streaming industry.

The recent rally in U.S. stocks, led by the acquisition of ai-focused AMD, highlights the continued influence of the tech sector on the market. While companies like AMD and fuboTV celebrated their wins, others like McDonald's are adapting to maintain their position. This diverse corporate landscape, spanning from technological advancements to menu innovations, reflects the dynamism of today's market.