THE “SILVER” LINING

(AMD), (NVDA), (INTC), (AMZN), (MSFT), (GOOG), (GOOGL)

Why did Advanced Micro Devices (AMD) acquire Silo AI? Because they needed a place to store all their extra cash! Just kidding. 

You might be thinking, "Why would AMD spend €613.7 million ($665 million) on a company named after a grain storage container?" 

But trust me, this acquisition is no joke. It's a strategic move that could help AMD give Nvidia (NVDA) a run for its money in the AI chip market.

You see, AMD has been trailing behind Nvidia in the AI chip market, and they needed a secret weapon to level the playing field. That's where Silo AI comes in. 

This little-known Finnish startup has been quietly making waves in the AI world, and AMD saw their potential to help them catch up to and even surpass Nvidia.

For those of you who've been living under a rock (or perhaps just enjoying a balanced portfolio), AMD just dropped €613.7 million - that's about $665 million for us Yanks - to snag Silo AI. 

Let me break it down. AMD's already got a thoroughbred in its stable with the Instinct MI300X GPU. This beauty helped drive $2.3 billion in Q1 revenues for the data center segment. Not too bad, right? 

In the world of AI, though, that's like bringing a knife to a gunfight when Nvidia's packing a bazooka. This is why the Silo AI acquisition is so critical to AMD.

Silo AI has been training large language models on AMD hardware like it's going out of style. They've even got some fancy EU language models with names like "Poro" and "Viking" that sound more like craft beers than AI. 

But here's the real kicker - Silo's client list includes none other than Nvidia itself. Talk about sleeping with the enemy.

Now, let's not kid ourselves. AMD, with its $300 billion market cap, is still playing catch-up to Nvidia's jaw-dropping $3.3 trillion valuation. But with Silo AI in its corner, AMD's got a real chance at cementing its position as the undisputed silver medalist in the AI race. 

And let's not forget about Intel (INTC) - their Gaudi 3 might be in the running, but it's looking more like a moped competing against AMD and Nvidia's superbikes.

What's even more interesting is that AMD's not just gunning for Nvidia's data center lunch money. They're going straight for the end-users, the customers who actually generate AI revenues for cloud giants like Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOG, GOOGL). 

It's like AMD's saying, "Why fight over the hardware when we can own the whole AI enchilada?"

But, will this whole Silo AI deal really help AMD overtake Nvidia? Short answer: Nope. Long answer: Not in this lifetime, pal. But that's not the point. 

AMD's playing 4D chess while everyone else is playing checkers. For the first time, we might see AMD report revenues that don't come from pushing silicon. Imagine that - a chip company making money from... *drum roll*... software.

Speaking of money, let's talk numbers. AMD's got enough cash to make this all-cash acquisition without breaking a sweat. Their last quarter's levered free cash flow could cover this deal with change left over for a fancy dinner. It's pocket change for the potential upside. 

However, it's important to note that AMD's revenues are more volatile than a day trader's blood pressure. We saw an 11% sequential drop from Q4 2023 to Q1 2024. 

Why? Because Nvidia's supply constraints eased up, and demand flowed back to Team Green. Expect this seesaw to continue, my friends.

So, am I telling you to buy AMD? You bet your last Bitcoin I am. But listen closely - this isn't for the get-rich-quick crowd. 

We're talking years, maybe even a decade, for this play to fully unfold. Every time AMD fills Nvidia's supply gaps, expect the stock to pop. 

Every soft quarter? That's your chance to load up like it's Black Friday at Best Buy.

So, keep your eyes peeled for Nvidia's Q2 earnings call next month and AMD's Q2 results at the end of this month. Don't expect fireworks unless AMD shows strong sequential growth. 

Remember, in the world of AI chips, today's underdog could be tomorrow's top dog. AMD might not be the fastest car on the track yet, but with Silo AI under the hood, they've got a few new tricks up their sleeve. 

And in this market, sometimes being the clever underdog is just as profitable as being the reigning champ.