China spent $260 billion on computer chips in 2018. It now spends more on buying chips than it does on oil
-- Stephen McBride, RiskHedge
I was reading Stephen's newsletter tonight and I found it quite timely because I had been watching AMD rocket some 8%, during the trading session. I am in the office this week, which is just a short distance from the old AMD campus in Sunnyvale. The old campus is being demo'd for new condominiums (I'll snap some pictures tomorrow, and update this post) because almost nobody can afford to have a 30-acre campus in Silicon Valley, anymore. Land is just too valuable. So valuable, in fact, that I'm sure the owner (Irvine Company in Newport Beach, CA) moved AMD to their new digs in Santa Clara, at no cost (Irvine Company also owns the new Santa Clara building). It's not cheap to move a big company, but condos in Sunnyvale start in the low $1.5 millions.
Stephen's newsletter made me curious about AMD's customer base, so I pulled-up their last annual report (EDGAR Company Filings) to check on their exposure to China. In 2016 China was 27% of AMD's business, in 2017 that grew to 33% of the business, and now China accounts for 39% of AMD's overall sales.
How do you quantify the risk in a stock that's up 91% in 6 months and has 39% of their revenue coming from China, in the middle of a trade war?
Disclaimer: I own ProShares Short S&P 500 and AMD is a component of the index