[TradingView - AMD posting a 17x return, outperforming nearly 38 times the return that Intel gave, excl. dividend pocket money]
AMD has been the bearer of great returns for many investors providing a 17 fold return on investment in just 5 years. A reasonable PE ratio of around 37, not dramatically outpacing the S&P500 benchmark everyone loves, that tells us that AMD still has growth ahead.
I could dive into fundamentals and share charts of future growth of the technology sector but I think Intel could be the better bet now… why?
Simply because a China-Taiwan crisis produces asymmetrical risk that cannot be ignored!
[Image from Foreign Affairs - Although war is not a certainty, nor wished for by any reasonable person. China has made its desires known. Even physical embargoes and a drawn out cold war could cause dire disruptions to market that China is currently hedging itself against, with domestic production growth in fabs.]
To be clear, AMD uses TSMC for all its production. It does not produce any chips itself.
Of the 17 TSMC fab locations, all except 1 are located within either China or Taiwan. That is the TSMC WaferTech Fab in the USA that produces 160 nm chips that are of no use to AMD.
Intel on the other hand has virtually all its manufacturing on US soil for the x86 architecture that competes directly with AMD. Furthermore, Intel is venturing into the GPU market and although this is being outsourced to TSMC currently, Intel has the capability (possibly not the capacity) to produce this in-house.
Even Apple’s new M1 chip comes from Taiwan. The asymmetry is clear as day, and rather embarrassingly, the F35 fighter jet that could aid in protecting Taiwan has its chips come from Taiwan.
So when the Pentagon realises its mistakes, and China pushes for more domestic production of chips, we really have to ask… can we hold AMD through that or is Intel the better bet?
To wrap up this thought, please just pretend that RISC-V cannot slide into these markets to dethrone AMD and Intel as the kings of this market should the s**t hit the fan.
Sorry AMD, time to reduce my exposure.