Meta-AMD deal makes sense for Meta but less so for AMD, says Clockwise Capital's Jams Cakmak
Summary
- Meta's deal with AMD is viewed as a strategic win for Meta (supply diversification) but raises questions about AMD's leverage, as they may be giving up equity to fulfill demand.
- The firm maintains a preference for Nvidia over AMD in the chip race, viewing it as the stronger "horse."
- Broad enterprise software (CRM, Adobe) is being avoided due to slow growth and valuation concerns, while specific "pockets" like crypto-exposed infrastructure (Hut 8) and DevOps (GitLab) are favored.
- The firm has completely exited the Financials sector, citing a potential rising correlation between financials and the struggling software sector.
Trade Ideas
"It makes a lot of sense for Meta standpoint... why wouldn't you want to diversify your supply base?" regarding the AMD deal. Conversely on AMD: "There's questions about... why they have to keep doing this and give up equity in exchange to fulfill demand." The deal de-risks Meta's infrastructure build-out. However, for AMD, the terms suggest they lack pricing power compared to Nvidia. If AMD has to dilute or give favorable terms to secure customers, their margins are at risk. Nvidia remains the dominant player with better leverage. Long Meta for execution; Long Nvidia for dominance. Be cautious on AMD due to deal structure concerns. AMD's next-generation offerings could surprise to the upside in performance, eroding Nvidia's moat.
"Apple is not really one of those stocks that we trade... we look at it as a 5% top line grower." The news about manufacturing the Mac Mini in the USA is PR/political noise and does not alter the fundamental thesis. Apple is a low-growth "GDP-plus" stock, not a vehicle for generating alpha in an active fund. Neutral. It is a source of funds, not a growth driver. A major new product cycle (e.g., AI integration on device) could re-accelerate growth beyond 5%.
"We do like pockets of software companies like Hut 8 Corp... GitLab, you know that's a new position for us." While the speaker is bearish on general SaaS, he seeks alpha in specific, high-growth niches. Hut 8 offers exposure to the "digital asset treasury" and compute infrastructure theme, while GitLab represents a specific bet on developer tools/AI integration rather than general enterprise seats. Long specific, idiosyncratic tech plays that decouple from the broader software slowdown. Hut 8 is highly correlated to Bitcoin price volatility; GitLab faces competition from Microsoft (GitHub).
"The CRMs, the Adobes and whatnot of the world, we're not really there." The "System of Record" and legacy SaaS trade is crowded and slowing. These companies are viewed as having limited upside compared to hardware or niche infrastructure, likely due to AI disruption fears or market saturation. Avoid legacy large-cap software. A rotation back into value/quality tech could lift these names as safe havens.
"We exited financials completely... there is going to be increasing correlation between the financial sector and the software sector." This is a second-order macro call. If software companies (which are heavy borrowers or depositors) struggle, or if the "fintech" overlap drags down traditional financials, the sector loses its defensive appeal. He views them as risk-correlated rather than a value hedge. Sell/Avoid Financials to remove exposure to systemic tech/software contagion. Financials often outperform in high-rate environments or during economic soft landings, regardless of tech performance.
