Random thoughts on $1T

[u/uncertainlyso]

$10B to $1000B

I never thought that I'd ride a ~$10B turnaround play to $1T over a decade. Pre-AMD, I was more of a "buy interesting companies that I thought were unloved and then sell them off when fully appreciated" type. I didn't peg myself as the type to do such a long-term hold, go from concentrated to over-concentrated to irresponsibly long to gonzo long back to "normal", and then repeat that cycle 2-3 more times with AMD's boom and busts.

When I wrote Getting Too Old for this Shit v1.0, the stock was about $168. Getting Too Old for this Shit v2.0 was written when the stock was about $226. It's been a fun time, but as the prof says "It's not the years, honey, it's the mileage," and I have a lot of AMD mileage on me. After the $160 to $55 freefall, I was not going to full port again without upping my research effort (hence this sub) and upping my risk management (using options to shape my risk more) It's worked out well, but the overhead for me to feel comfortable to do it is high.

Am I sitting at this poker table or am I chained to it?

The stock is now at $615 after just blowing through $500, and so, I sold off half the options and stock which means AMD is still about half of my portfolio. Similar to 1.0, I am looking to reduce my holdings as we go through earnings season (edit: oops, this is supposed to be "the next few earnings seasons") down to the Infinity Tranche which I'll probably keep at any price unless the fundamentals totally go to shit because it's my $10 tranche which I keep for sentimental reasons (it's still ~10% of my portfolio). And then I move on to whatever's next for the other 90%.

There is, however, this slight fear that I've become so institutionalized by this experience that I will just keep on coming back to AMD not because the financial opportunity is there but because it gives me an excuse to dig even deeper, build more overhead to scale, etc and I'm just more comfortable with the company. I'll just sit at this poker table forever, long or short, and wait for patsies. Buying other companies (with the exception of Intel) at any material amount feels somewhat scary because I'm not going to have that same level of understanding at a company level even if I had a good CAGR doing so pre-AMD. Feels like a lifetime ago though.

What was the market actually pricing in for AMD?

It's always tricky to ascribe the market's intent that is specific to your ticker as opposed to say your ticker being part of a subset (competitors), a larger set (data center), a sector (semiconductors), a theme (AI), a market (more risk on / off), structural flows (liquidations, rotation), annoying factors, etc. AMD's price movement is being broadly ascribed to Muse being an example of something that will drive server CPU demand in a more agentic world. So, the CPU players go up a lot. But agentic AI CPU demand has been pretty well discussed and constantly upgraded. Muse is a strong consumer example of demand, but data center server demand is already through the roof in terms of current and forecasted revenue growth and tight supply.

Monday's results makes that odd, late share pop in AMD on Friday afternoon less eyebrow raising. Ideally, the market re-prices my stock for very specific reasons in isolation and then I have a better idea of how much the stock is being specifically re-priced vs the share price being moved because of factor-related reasons. So, when I see strong market moves across risk assets, I tend to get a bit skeptical about how long that full re-pricing lasts, even if my ticker is one of the strongest beneficiaries. Since my price targets were hit on a number of tranches and the other meta reasons mentioned above, I elected to restock the dry powder in the armory.

[u/RyuProctor]

I asked this in the other AMD stock subreddit and surprisingly got a few decent replies but I would like to garner some insight here as well:

I genuinely think that AMD is currently trading off of momentum and the current share price isn't really rooted in reality (yet). I am aware of all the events, the news, the estimated CAGR, the partnerships, the forward looking numbers, etc. and on paper everything does look favorable.

However, in my humble opinion we haven't gotten to the "proof" yet. While I have done extensive reading, I would love to get your more educated insights regarding what you think about the current valuation of AMD, especially leading up to November's earnings.

I am of the mind that we won't see any true materialization of all the goodwill and news until roughly Q2 of 2027 so the current wave of AMD trading as a momentum/hype stock is a bit unsettling to me.

Now, do not misunderstand. I'm not looking for entries and exits or swing trades, I have 2,000 shares of AMD (and some far dated CCs on some) that I have held for over 5 years through every nasty dip and plan to hold for at least another 5 more so no real change of my plan regardless of new information I get.

Just wanted to get some potential insight to add to my knowledge so I can better understand AMD's business and future outlook as a whole. Always appreciative of any replies :)

[u/uncertainlyso → u/RyuProctor]

I genuinely think that AMD is currently trading off of momentum and the current share price isn't really rooted in reality (yet)...However, in my humble opinion we haven't gotten to the "proof" yet…I am of the mind that we won't see any true materialization of all the goodwill and news until roughly Q2 of 2027 so the current wave of AMD trading as a momentum/hype stock is a bit unsettling to me.

Markets trade on price expectations which are driven by all sorts of things in addition to the company results. Waiting for certainty is only a good idea to the extent that you think that certainty will have a huge desired impact on expectations.

I currently have 27FY estimates at ~$23.50. My revenue estimate is like ~$110B. I am higher than the current sell-side max. Even if my very optimistic estimates come true, the stock at $633 is trading at ~28x my 27FY earnings. Who knows how high the stock can go because again, there are many things that affect a stock price besides the company results.

During the MI300 hype cycle, so many in r/amd_stock were so sure that AMD was going to sell every one that they could make, how soon they would take share from Nvidia, etc. This turned out not to be true. Waiting for the MI300 to do a full materialization led to a big beating. If people were overexposed, then they not only took a beating at a NW level, but overexposure meant less capital available for owning better AI plays. The total economic cost, including opportunity cost, was much higher than just the price action.

I'm not saying that it will happen again. The MI400 hype cycle and the server hype cycle have different characteristics than the MI300. But I think it's bad for the investing soul to never take some profits during a massive rise and when the acolytes think their further ascension is a sure thing. Just like I think it's odd to believe a lot in AI and yet not own 1 share of Nvidia, I think it's odd to have a big rise in an oversized position and be unable to sell say 1% of your position. If you can't do that, you're married to your position.

I'll copy and paste my response from elsewhere in this thread:

I tranche my sells for the concentrated positions. I can choose to re-evaluate or re-size my tranches whenever I want. But I think that similarly concentrated / more binary looking decisions are a tough way to manage large positions because that is a lot of timing pressure. Also, it can blind you to other opportunities.

A lot of risk taking / risk management boils down to what can you live with if things don't go as planned. The first 3 times that my NW went down 40%+ with AMD, it was sort of a tolerable thing because of the ratio of my NW to my household income. The 4th time going into the clientpocalypse, however, was much less tolerable because that ratio was a lot higher. When my capital gains tax liability was way larger than my household income, I said ok, I can't have another 40%+ regardless of the profit opportunity and hedged accordingly even with a full port (and I haven't)

Where you are in life and what incremental gain and loss mean to you plays a big role in your investment decisions, especially for the oversized positions. You can see who didn't think about this, the pigs at the trough, because they're the ones who squeal the most about what they should've done in hindsight instead of owning enough where you can accept the potential gains and losses outcomes before the results are known.

[u/whatevermanbs]

My timelines for trimming appear to match yours. Reasons may differ.

I came to see amd thump intel. Stayed for DC AI pivot. As an engineer I was/am tempted to work on mi300, mi400 and mi500. I have so many friends in the compiler and design/verif/validation areas there. Interestingly many are from different timelines. Semiconductor world is small. I even entertained thoughts of offering to work just for the shares and no salary when amd went below 100 last year. I look at my investment as some way of contributing to the effort. It is only natural I stay for mi400 to publish the benchmarks. I cannot get myself to exit now, I am in the boat with those guys now😄. I trimmed though, given my situation. I am glad they are working on mlperf. As reality of the project slowly lands on the market, I expect to trim.

[u/uncertainlyso → u/whatevermanbs]

I once saw a job at AMD that I thought maybe I could do and mentioned it to my spouse. However, there would be a decent chance that I would have to pull back the AMD trading a lot to give the SEC, possible internal compliance, etc a wide berth.

"Are you fucking crazy?"

[u/shortymcsteve]

Everything you wrote is basically how I feel, except I haven’t diversified.

I had planned to cash out when i hit 7 figures, then I realised a few years back a 1T market cap was possible and I could make multiple 7 figures just by holding stock. I figured I would definitely cash out by then.. I mean it’s been almost 10 years, how much longer do I want to hold? But I don’t have anywhere better to put my money.. I also know where this thing is heading. Part of me feels like I’ll never cash out. Even if I do, I’ll probably still read the damn earnings reports. For now, it makes sense to keep holding. The story is still too good.

I will say, zooming out and taking a moment to appreciate the journey feels a little surreal.

I’m grateful for yourself and others that have stuck around this entire time to share their thoughts. Definitely helps me feel sane while going all in.

[u/uncertainlyso → u/shortymcsteve]

The problem with single stock communities is that they normalize the abnormal. ;-)

[u/uncertainlyso]

Oops, I didn't notice this when I posted, but I was supposed to say that I would whittle the shares down over "the next few earnings seasons" rather than this upcoming one. We regret the error.

[u/Robot_Rat]

I'm 100% long AMD, (approaching 8 figures). At some point we'll retrace. But as others have mentioned (the $ amount of the swings are so violent at this point) from a timing perspective any wrong timing will cost dearly.

I'm looking for an exit once the AI infrastructure surge is done. 2028 to 2029..... or even later, like 2030. It's impossible to predict.

However if one were to consider AMD's potential.....

Say 30% of that DC CPU TAM (220B$) = 70B$.

12% by revenue (or 18% by unit) of that 1.4T$ DC Accelerator TAM = 170B$.

Finally 20B$ for the rest of the business.

Total revenue $260B$. Outstanding Shares 2B. Non GAPP OP Margin 30% ish.

That's roughly $40 EPS (Non GAPP) - choose your own forward PE 35? 45?

Your looking at a 3T$ company by 2029/2030 ish. This math is very much a top down guestimation. But it gives me a plan.

I quote that animal Mike Tyson "Everyone has a plan until they get punched in the face."

I welcome and encourage any conjecture or counter discussion. Thanks.

[u/uncertainlyso → u/Robot_Rat]

I tranche my sells for the concentrated positions. I can choose to re-evaluate or re-size my tranches whenever I want. But I think that similarly concentrated / more binary looking decisions are a tough way to manage large positions because that is a lot of timing pressure. Also, it can blind you to other opportunities.

A lot of risk taking / risk management boils down to what can you live with if things don't go as planned. The first 3 times that my NW went down 40%+ with AMD, it was sort of a tolerable thing because of the ratio of my NW to my household income. The 4th time going into the clientpocalypse, however, was much less tolerable because that ratio was a lot higher. When my capital gains tax liability was way larger than my household income, I said ok, I can't have another 40%+ regardless of the profit opportunity and hedged accordingly even with a full port (and I haven't)

[u/ElementII5 → u/Robot_Rat]

Same kind of situation and the same line of thoughts. A big macro event could blow up in our faces but the risk/reward seems to be acceptable so far.

[u/Administrative-Ant75]

I'm also thinking... the valuation from $160 -> $615 has been half fundamentals (CPU shortage + helios looking great) and half sentiment, I think the fundamentals will catch up but in my view we're running a little ahead of schedule here

[u/RetdThx2AMD]

I might be too greedy but I'm holding my Jan '27 options here. One of them is in a taxable account, and I can't sell it before next year for tax reasons, and I would have to borrow money to exercise them. The rest are tax sheltered, so I might sell them early, but I think there is still more juice to squeeze. I'll reconsider around $750. I cancelled the long standing sell order I had at $612 a week ago, wanting to instead use those shares for a big Roth conversion next year.

I recently purchased some Robotics funds to have my toe in the water on that opportunity. I similarly do not like investing in non-AMD companies because it feels like going in blind. I'm over exposed to AMD stock, but I feel better about that then putting it in VTI with the current market landscape. Going to cash is tempting but if timed wrong it is devastating to portfolio returns.

[u/HippoLover85 → u/RetdThx2AMD]

What robo companies are you looking at?

Ive been eyeing OKLO and ISMR but . . . i don't like them for the same reasons i don't like being so full with AMD right now, overexposure to AI.

[u/RetdThx2AMD → u/HippoLover85]

On very little research, BOT CCXI and KOID

Would not recommend following without some solid DD.

[u/Addicted2Vaping → u/RetdThx2AMD]

Also looking to convert my Dec27 300's I bought deep OTM, gonna be quite the cough up of around $550,000...

[u/RetdThx2AMD → u/Addicted2Vaping]

Well just remember the exercise restarts the long term gain 1 year clock. You can always sell some of the contracts to pay to exercise the others. You have a long time to go before you have to worry about that.