AMD Earnings and SpaceX Call Takeaways

Before I get to AMD’s second quarter, let me say a couple of things about SpaceX.

The day SpaceX IPO’d on June 12, I wrote that the multi-trillion dollar valuation was “way too high” and that the best thing to do was watch from the sidelines.

The stock rose for three days before dropping like a rock and getting cut in half. I’m not comfortable with the valuation here either, so I’d suggest staying away.

But that doesn’t mean listening to SpaceX’s earnings call can’t be useful for AI trade investors.

First, Elon Musk threw a haymaker at the AI memory bears:

“Limiting factor currently is memory. Memory output is increasing by around 20% per year. Now normally that would be fantastically fast and amazing for any large mature industry. But ask yourself is the demand increasing by 20% a year? No, the demand is increasing by 200% a year, maybe higher. So if you’ve got demand increasing much faster than supply then Economics 101 would suggest that the price increases. It does not decrease.” – Musk on SpaceX earnings call.

Elon’s comments match those of the HBM memory supplier executive who recently said customers are asking for 5x–6x more capacity, significantly more than the 2x capacity additions currently planned for the next five years. (Note for later: AMD said they have enough supply secured to more than meet their guidance)

Both data points suggest memory revenue will not peak anytime soon, which doesn’t square with the current mid-single-digit forward P/E valuations of the top suppliers.

Second, Elon also boosted Nvidia’s prospects for the next year, announcing that SpaceX will more than triple its Nvidia GPU compute footprint by the end of 2027.

“We expect to end this year with over two gigawatts of compute and probably our cumulative compute online by the end of next year will be several times higher .. Let’s say, be closer to ten gigawatts of compute than five gigawatts of compute. Going forward, we’ve decided to build exclusively on Nvidia because we think the Vera Rubin architecture is the best architecture.” – Musk on SpaceX earnings call.

Elon says memory fundamentals and Nvidia’s position in the market are both extremely strong. He’s right.

AMD has been one of our best-performing ideas since this Substack began.

Now, on to AMD Q2 earnings.

Traders reacted negatively at first, but here’s why I think the dip is a buying opportunity.