For AMD Stock, the Dr. Lisa Su Departure Rumor Carries Weight

Although AMD's CEO denies that she’s heading to IBM, the move would make sense at many levels

Let’s be clear about something: Advanced Micro Devices (NASDAQ:AMD) has proved all doubters wrong. Since dipping below $2 territory in early 2016, AMD stock has experienced nearly a 16-fold increase. That pretty much blows out the returns of every major publicly traded company.

For AMD Stock, the Dr. Lisa Su Departure Rumor Carries Weight

Yet exuberant stakeholders should always remain vigilant, objective and in many ways, agnostic. I understand the sentiment. When you have a resounding equity in your portfolio, you feel invincible, as if you have the market’s version of the Midas touch. But it’s at these times when you should consider the opposite angle.

For the AMD share price, I’m concerned that nearer-term pressures may create volatility. First, we must discuss the obviously negative implications if Advanced Micro Devices CEO Dr. Lisa Su leaves the company. Right now, we’re in the pure speculation phase. Not only that, Su took to Twitter earlier this week and stated emphatically that there is “zero truth” to this rumor.

Subsequently, AMD stock popped up when Su cleared the air. And on the following day, the AMD share price enjoyed a fairly solid session.

Nevertheless, I’m sure the markets are still digesting the possibilities of a move. Again, despite this being a heavily disputed rumor, this move would make sense. International Business Machines (NYSE:IBM) needs a leadership catalyst to transition its many parts to a cohesive recovery. On a professional level, there are few bigger roles than IBM CEO.

Furthermore, Su achieved one of the most remarkable comebacks in corporate history. With AMD stock still near decade highs, it’s a great time to leave a hero.

Besides, the AMD share price is diving into some trouble waters recently.

AMD Stock Faces a Gargantuan Trade War Challenge

This segues into another massive headwind for AMD stock: the nasty U.S.-China trade war that will probably get nastier.

To be completely fair, the trade crisis isn’t an exclusive headwind for the AMD share price. Of course, virtually all companies will suffer volatility — if they haven’t already — if U.S.-China relations deteriorate.

But the problem for Advanced Micro Devices is that it needs China to complete and sustain its recovery track. True, the semiconductor firm mitigated some of the trade war risks through supply-chain redistribution. Specifically, management shifted manufacturing facilities to U.S.-friendly nations.

However, that provides only a partial solution. In reality, AMD’s China segment represents the largest international revenue category. Therefore, a significant drop in China-based sales will have a noticeable impact on total revenues. And this isn’t the first time that a China slowdown hurt AMD.

What it really means is that a major revenue channel for the entire semiconductor industry is at risk. Thus, AMD stock isn’t alone in the fallout. Rivals such as Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC) have also suffered.

But what makes this juncture particularly painful for the AMD share price is the resource base. Simply put, AMD’s well-heeled competitors have ample funds to ride out an unexpectedly long storm. Don’t get me wrong: financially, Advanced Micro Devices no slouch. Yet they’re facing an incredibly tough proposition, which is to compete against rivals and stay above the geopolitical turbulence.

Indeed, the calculus for AMD stock has dramatically ruptured. Based on current evidence, the trade war will probably worsen. And that may lead Nvidia, Intel and others into panic mode, bitterly fighting for whatever scraps remain.

Unfortunately, I don’t think AMD stock is built for this kind of dogfight.

A Rumor That’s Incredibly Compelling

This all brings me back to Dr. Lisa Su. Again, let me reiterate the point: Dr. Su has stated that she “loves” Advanced Micro Devices Inc.

At the same time, feelings can change. What I can’t get over is how compelling this rumor is. For Su, a theoretical move to IBM has, in my opinion, no drawbacks. Sure, the AMD share price will fall, and some fanboys will panic. But in the long run, AMD will remember her very fondly. You can say she did the impossible, pulling a laggard from the brink of death to astounding prominence.

If she continues to stay on board, she likely has minimal upside potential and serious downside risks. Since we’re heading toward a U.S.-China abyss, I’d say the upside is almost nonexistent.

But with IBM, it’s all upside for Su. “Big Blue” is on the outside looking in. They know they’re in for an uphill climb and are willing to put maximum effort to accomplish their goals. Even Su’s mere presence would be a lift for IBM.

But even if Su stays with AMD, I’d still trim a position with AMD stock. It’s going to take more than strong leadership to overcome the imminent waves.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2019/08/lisa-su-rumors-carries-weight-for-amd-stock/.

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