(AMD) Archives - Page 11 of 17 - Mad Hedge Fund Trader

Why China is Driving Up the Value of Your Tech Stocks

Reduce the supply on any commodity and the price goes up. Such is dictated by the immutable laws of supply and demand.

This logic applies to technology stocks as well as any other asset. And the demand for American tech stocks has gone global.

Who is pursuing American technology more than any other? That would be China.

Ray Dalio, founder and chairman of hedge fund Bridgewater Associates, described the first punch thrown in an escalating trade war as a “tragedy,” although an avoidable one.

Emotions aside, the REAL dispute is not over steel, aluminum, which have a minimal effect of the US economy, but rather about technology, technology, and more technology.

China and the U.S. are the two players in the quest for global tech power and the winner will forge the future of technology to become chieftain of global trade.

Technology also is the means by which China oversees its population and curbs negative human elements such as crime, which increasingly is carried out through online hackers.

China is far more anxious about domestic protest than overseas bickering which is reflected in a 20% higher internal security budget than its entire national security budget.

You guessed it: The cost is predominantly and almost entirely in the form of technology, including CCTVs, security algorithms, tracking devices, voice rendering software, monitoring of social media accounts, facial recognition, and cloud operation and maintenance for its database of 1.3 billion profiles that must be continuously updated.

If all this sounds like George Orwell’s “1984”, you’d be right. The securitization of China will improve with enhanced technology.

Last year, China’s communist party issued AI 2.0. This elaborate blueprint placed technology at the top of the list as strategic to national security. China’s grand ambition, as per China’s ruling State Council, is to cement itself as “the world’s primary AI innovation center” by 2030.

It will gain the first-mover advantage to position its academia, military and civilian areas of life. Centrally planned governments have a knack for pushing through legislation, culminating with Beijing betting the ranch on AI 2.0.

China possesses legions of engineers, however many of them lack common sense.

Silicon Valley has the talent, but a severe shortage of coders and engineers has left even fewer scraps on which China’s big tech can shower money.

Attempting to lure Silicon Valley’s best and brightest also is a moot point considering the distaste of operating within China’s great firewall.

In 2013, former vice president and product spokesperson of Google’s Android division, Hugo Barra, was poached by Xiaomi, China’s most influential mobile phone company.

This audacious move was lauded and showed China’s supreme ability to attract Silicon Valley’s top guns. After 3 years of toiling on the mainland, Barra admitted that living and working in Beijing had “taken a huge toll on my life and started affecting my health.” The experiment promptly halted, and no other Silicon Valley name has tested Chinese waters since.

Back to the drawing board for the Middle Kingdom…

China then turned to lustful shopping sprees of anything tech in any developed country.

Midea Group of China bought Kuka AG, the crown jewel of German robotics, for $3.9 billion in 2016. Midea then cut German staff, extracted the expertise, replaced management with Chinese nationals, then transferred R&D centers and production to China.

The strategy proved effective until Fujian Grand Chip was blocked from buying Aixtron Semiconductors of Germany on the recommendation of CFIUS (Committee on Foreign Investment in the United States).

In 2017, America’s Committee on Foreign Investment and Security (CFIUS), which reviews foreign takeovers of US tech companies, was busy refusing the sale of Lattice Semiconductor, headquartered in Portland, Ore., and since has been a staunch blockade of foreign takeovers.

CFIUS again in 2018 put in its two cents in with Broadcom’s (AVGO) attempted hostile takeover of Qualcomm (QCOM) and questioned its threat to national security.

All these shenanigans confirm America’s new policy of nurturing domestic tech innovation and its valuable leadership status.

Broadcom, a Singapore-based company led by ethnic Chinese Malaysian Hock Tan, plans to move the company to Delaware, once approved by shareholders, as a way to skirt around the regulatory issues.

Microsoft (MSFT) and Alphabet (GOOGL) are firmly against this merger as it will bring Broadcom intimately into Apple’s (APPL) orbit. Broadcom supplies crucial chips for Apple’s iPads and iPhones.

Qualcomm will equip Microsoft’s brand-new Windows 10 laptops with Snapdragon 835 chips. AMD (AMD) and Intel (INTC) lost out on this deal, and Qualcomm and Microsoft could transform into a powerful pair.

ARM, part of the Softbank Vision Fund, is providing the architecture on which Qualcomm’s chips will be based. Naturally, Microsoft and Google view an independent operating Qualcomm as healthier for their businesses.

The demand for Qualcomm products does not stop there. Qualcomm is famous for spending heavily on R&D — higher than industry peers by a substantial margin. The R&D effort reappears in Qualcomm products, and Qualcomm charges a premium for its patent royalties in 3G and 4G devices.

The steep pricing has been a point of friction leading to numerous lawsuits such as the $975 million charged in 2015 by China’s National Development and Reform Commission (NDRC) which found that Qualcomm violated anti-trust laws.

Hock Tan has an infamous reputation as a strongman who strips company overhead to the bare bones and runs an ultra-lean ship benefitting shareholders in the short term.

CFIUS regulators have concerns with this typical private equity strategy that would strip capabilities in developing 5G technology from Qualcomm long term. 5G is the technology that will tie AI and chip companies together in the next leg up in tech growth.

Robotic and autonomous vehicle growth is dependent on this next generation of technology. Hollowing out CAPEX and crushing the R&D budget is seriously damaging to Qualcomm’s vision and hampers America’s crusade to be the undisputed torchbearer in revolutionary technology.

CFIUS’s review of Broadcom and Qualcomm is a warning shot to China. Since Lattice Semiconductor (LSCC) and Moneygram (MGI) were out of the hands of foreign buyers, China now must find a new way to acquire the expertise to compete with America.

Only China has the cash hoard to take a stand against American competition. Europe has been overrun by American FANGs and is solidified by the first mover advantage.

Shielding Qualcomm from competition empowers the chip industry and enriches Qualcomm’s profile. Chips are crucial to the hyper-accelerating growth needed to stay at the top of the food chain.

Implicitly sheltering Qualcomm as too important to the system is an ink-drenched stamp of approval from the American government. Chip companies now have obtained insulation along with the mighty FANGs. This comes on the heels of Goldman Sachs (GS) reporting a lack of industry supply for DRAM chips, causing exorbitant pricing and pushing up semiconductor companies’ shares.

All the defensive posturing has forced the White House to reveal its cards to Beijing. The unmitigated support displayed by CFIUS is extremely bullish for semiconductor companies and has been entrenched under the stock price.

It is likely the hostile takeover will flounder, and Hock Tan will attempt another round of showmanship after Broadcom relocates to Delaware as an official American company paying American corporate tax. After all, Tan did graduate from MIT and is an American citizen.

The chip companies are going through another intense round of consolidation as AMD (AMD) was the subject of another takeover rumor which lifted the stock. AMD is the only major competitor with NVIDIA (NVDA) in the GPU segment.

The cash repatriation has created liquid buyers with a limited amount of quality chip companies. Qualcomm is a firm buy, and investors can thank Broadcom for showing the world the supreme value of Qualcomm and how integral this chip stalwart is to America’s economic system.

February 22, 2019

Diary, Newsletter, Summary

Global Market Comments
February 22, 2019
Fiat Lux

Featured Trade:

(FEBRUARY 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (MU), (AMD), (LRCX), (GLD), (FXE), (FXB), (AMZN),
(PLAY IT SAFE WITH ANTHEM), (ANTM), (CI)

February 20 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader February 20 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: If there is a China trade deal, should I buy China stocks, specifically Alibaba?

A: To a large extent, both Chinese and US stocks have already fully discounted a China trade deal, so buying up here could be very risky. The administration has been letting out a leak a day to support the stock market, so I don’t think there will be much juice left when the announcement is actually made. The current high levels of US stocks make everything risky.

Q: Is it time to buy NVIDIA (NVDA)?

A: The word I’m hearing from the industry is that you don’t want to buy the semiconductor stocks until the summer when they start discounting the recovery after the next recession (which is probably a year off from this coming summer). The same is true for Micron Technology (MU), Advanced Micro Devices (AMD), and Lam Research (LRCX).

However, if you’re willing to take some heat in order to own a stock that’s going to triple over the next three years, then you should buy it now. If you’re a long-term investor, these are the entry points you die for. Looking at the charts it looks like it is ready to take off.

Q: Should I be shorting the euro (FXE), with the German economy going into recession?

A: No. We’re at a low for the euro so it’s a bad time to start a short. It’s interest rates that drive the euro more than economies. With the U.S. not raising interest rates for six months, maybe a year, and maybe forever, you probably want to be buying the currencies more than selling them down here.

Q: Would you buy the British pound (FXB) on Brexit fears?

A: I would; my theory all along has been that Brexit will fail and the pound will return to pre-Brexit levels—30% higher than where we are at now. I have always thought that the current government doesn’t believe in Brexit one iota and are therefore executing it as incompetently as possible.

They have done a wonderful job, missing one deadline after the next. In the end, Britain will hold another election and vote to stay in Europe. This will be hugely positive for Europe and would end the recession there.

Q: What do we need to do for the market to retest the highs?

A: China trade deal would do it in a heartbeat. If this happens, we will get the 5% move to the upside initially. Then we’re looking at a double top risk for the entire 10-year bull market. That’s when the short players will start to come in big time. You’d be insane to new positions in stocks here. There is an easy 4,500 Dow points to the downside, and maybe more.

Q: Do you think earnings growth will come in at 5%, or are they looking to be zero or negative?

A: Zero is looking pretty good. We know companies like to guide conservative then surprise to the upside; however, with Europe and China slowing down dramatically, that could very well drag the U.S. into recession and our earnings growth into negative numbers. The capital investment figures have been falling for three months now. US Durable Goods fell by 1.2% in January.

This explains why companies have no faith in the American economy for the rest of this year. This was a big reason why Amazon (AMZN) abandoned their New York headquarters plans. They see the economic data before we do and don’t want to expand going into a recession.

Q: When will rising government debt start to hurt the economy?

A: It already is. Foreign investors have been pulling their bids for fear of a falling US dollar. They have also become big buyers of gold (GLD) in order to avoid anything American, so we have a new bull market there. In the end, the biggest hit is with business confidence.

Nothing good ever comes from exploding US deficits and companies are not inclined to invest going into that. That is a major factor behind the sudden deterioration in virtually all data points over the past month.

Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

February 21, 2019

Tech Letter

Mad Hedge Technology Letter
February 21, 2019
Fiat Lux

Featured Trade:

(BUY AMD ON THE DIP),
(AMD), (NVDA), (INTC),

Buy AMD on the Dip

Tech Letter

I am bullish Advanced Micro Devices (AMD).

The company is doing backflips and edging around other fertile pastures to the dismay of competitors.

They jumped all over Intel’s (INTC) CPU lead promising more cores and adding on more features to lure in a new audience.

In terms of computer graphics, Nvidia (NVDA) still wields more clout in the higher-grade GPU space and AMD has been playing second fiddle with cheaper, value-oriented GPU cards that can be best described as mid-range.

That is about to change.

AMD is at it again acing its attempt to pull down Goliath with its new Radeon VII.

This $700 GPU card is the first 7 nanometer (nm) GPU on the market and is a warning shot to Nvidia who they plan to surgically invade in order to snatch market share.

This new AMD GPU is a direct threat to Nvidia’s set of RTX 2080 graphics cards and is set at the same price point with comparable performance.

The Radeon VII is the next iteration to AMD’s Vega 64 and possesses similar architecture with specific enhancements in clock speeds and VRAM.

Gamers are still on the fence to whether this new product can eclipse the heavily entrenched Nvidia graphics cards that are time-honored, tested and stamped with the industries seal of approval.

It is still uncertain whether AMD can introduce the necessary supply and if you still remember when the prior iteration Vega 64 debuted in 2017, it was a threat to Nvidia’s top-tier GTX 1080, but ran out of inventory quickly.

The new Radeon VII card is one of the best on the market for professional work and still does well in the gaming realm, albeit with a lack of ray tracing.

Few video games support ray tracing currently but new game studios plan to adopt this cutting edge technology later this year.

I commend AMD’s first foray into this part of the niche market and when AMD upgrades its architecture and improves on the next iteration, Nvidia will be squarely in their crosshairs.

The number of new products that drive top-line growth is another reason to be positive on this stock.

Looking at the CPU market – momentum would be the key word to describe AMD’s current trajectory.

For generations, Intel has had a secure stranglehold on this rapidly expanding market, but the fringes of the industry have been hijacked by AMD and they seek to spread its tentacles deeper into foreign CPU waters.

By the end of the year, I believe that AMD will carve out a nice high single digit market share of global CPU sales.

Intel has been bogged down by production setbacks in the deployment of the 10-nm server chip giving AMD a chance to take advantage of this gaping pothole to jack up sales with its EPYC chip.

Not only that, AMD is motoring ahead with a superior 7-nm chip which is a faster processor and is more energy-friendly than Intel’s 10-nm version.

I can conclude that AMD is blowing past Intel in chip technology, and has its third generation of CPUs earmarked for the market in the summer ready to stretch the lead.

CEO of AMD Dr. Lisa Su is compounding the misery for Intel, offering a physical glimpse of plans to roll out its third generation Ryzen CPUs for PCs by the middle of the year at the Consumer Electronics Show in January.

Another catalyst that could drive the stock higher is a favorable earnings outlook in 2019.

After meeting expectations last quarter, expansion is expected in the high single digits in a tough chip environment that has wrought its fair share of carnage.

I wouldn’t pigeonhole the new product line as mere hype, it’s clear they are meaningfully enhanced and improved with each successive iteration.

I estimate that these new products will give AMD solid traction to close in on the competition in the CPU and GPU markets.

Clearly, this isn’t a 1-quarter venture, but visibly aware that AMD is making inroads into other markets are a demonstrably net negative to weight on Intel and Nvidia shares.

This part of tech is not without its headaches and is fraught with China risk.

Chinese gaming regulators have put the kibosh on new gaming licenses and AMD’s scaling back of forecasts should reflect this development.

Intel cited falling spend on server chips and Nvidia came out with a dreadful earnings report to forget lately.

However, when there is blood in the streets, the status quo is ripe for some change and I am confident that AMD can execute this aggressive ramp up after digesting some of the excessive inventory in the first quarter.

As AMD trades at $24, I can’t help but believe this name will end the year higher.

Investors must remember that in the near term, the Fed has hit the pause button aiding the equity market, and China has reportedly been keen on some massive chip purchases to help soothe the nerves of the administration.

If the market can marry this up with favorable reviews of AMD’s latest products, I don’t see why AMD can’t be trading at $30 by the end of the year.

At the Mad Hedge Lake Tahoe Conference, I proclaimed that AMD was one of my favorites going into 2019 and exploded upwards from $17 in October 2018.

AMD truly has not disappointed.

February 8, 2019

Diary, Newsletter, Summary

Global Market Comments
February 8, 2019
Fiat Lux

Featured Trade:

(FEBRUARY 6 BIWEEKLY STRATEGY WEBINAR Q&A),
(TLT), (FXA), (NVDA), (SPY), (IEUR),
(VIX), (UUP), (FXE), (AMD), (MU), (SOYB)

February 6 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader February 6 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Why are you so convinced bonds (TLT) are going to drop in 2019?

A: I think the Fed will regain the confidence to start raising rates again in the second half. Wage inflation is starting to appear, especially at the minimum wage level in several states. That will crater the bond market as well as the stock market, just as we saw in the second half of 2018. We’re in unknown territory in the bond market; we’re issuing astronomical WWII levels of debt and it’s only a matter of time before the Federal government crowds out private sector borrowers. Even if the bond market sidelines during this time, we will still make the maximum profit in the kind of option bear put spreads I have been putting on.

Q: Why did the Aussie (FXA) go down when they suddenly flipped from rising to cutting interest rates?

A: Interest rate differentials are the principal driver of all foreign exchange rates. They always have been and always will be. Rising rates almost always lead to a stronger currency. And with the US Fed on pause for the foreseeable future, we think the Aussie will be stronger going into 2019.

Q: Do you see the 10-year US Treasury yield going back up to 3.25% this year?

A: Yes, it’ll probably happen in the second half of the year—once the Fed gets its mojo back and decides that high employment and inflation are the bigger threats to the economy.

Q: Has NVIDIA (NVDA) bottomed here?

A: Probably, but you don’t want to touch the semiconductor chip companies until the summer. That’s when all the industry insiders expect the industry to turn and start discounting rocketing earnings after the next recession.

Q: Are stocks expensive here (SPY)?

A: On a trailing basis no, on a forward basis definitely yes. The current price/earnings multiple for the market is 17 now against a 14-20 range in 2018. So, we are dead in the middle of that range now. That’s OK when earnings are rapidly rising as they did last year. But they are falling now and at an increasingly increasing pace.

Q: Do you think the administration used the shutdown to bring forth a recession? To kickstart the pro-economic platform for reelection in 2020?

A: The administration’s view is that the economy is the strongest it’s ever been with no chance of future recession and that they will win the election as a slam dunk. If you believe that, buy stocks; if you don’t, sell them.

Q: How bad do you think Europe (IEUR) will get and does that mean the dollar (UUP) could see parity with the Euro (FXE) soon?

A: Europe is bad but they’re not going to raise interest rates anymore. However, they’re not going to cut them either because they’re already at zero. You need rising rates to see a stronger currency and the fact that the U.S. stopped raising rates is an argument for the Euro to go higher.

Q: Are we about to settle into a fading Volatility Index (VIX) environment for the rest of the year?

A: No, we are not; the (VIX) has been fading for 6 weeks. We’re approaching a bottom with the (VIX) here at $15, and the next big move in will probably be to the upside. The market has gotten WAY too complacent.

Q: Which are the most worrisome signals you see in the U.S. economy right now?

A: Weak earnings and sales guidance from all U.S. companies going forward and the immense jump in jobless claims last week as well as the ever-exploding amounts of government debt. Did I mention the trade war with China and the next government shutdown? Traders have a lot on their plate right now.

Q: How far will Lam Research (LRCX) go?

A: We’ve just had a massive 46% move up, so I wouldn’t chase it up here. However, long term there is still an easy double in this stock. They’re tied in with the semiconductor companies; NVIDIA, Advanced Micron Devices (AMD) and Micron Technology (MU) all trade in a group and may take one more run at the lows. Short term it’s overbought, long term it’s a screaming buy.

Q: Will the ag crisis feed into the main economy?

A: It could. All ag storage in the country is full, so farmers are putting the new harvest under tarps where it is rotting away and then claiming on their insurance. If you add another harvest on top of that it will be a disaster of epic proportions. China is America’s largest ag customer. It took decades of investment to develop them a client, and they are never coming back in their previous size. The trust is gone. Bankruptcies are at a ten-year high and that could eventually take down some regional banks which in turn hurt the big banks. However, ag is only 2% of the US economy, so it won’t cause the next recession. It’s really more of a story of local suffering.

Q: If you give out stop and not filled at stop price, when and how do you adjust to exit?

A: I would quickly enter it and if you’re not done quickly move it down five cents. If you don’t get done, do it again. There is no way to know where the real market is in until you put in a real order. There are 11 different option exchanges online and they are changing prices every millisecond. Furthermore, spread trades can get one leg done on one exchange and the second leg done on another, so prices can be all over the place.

Q: What data goes into the Mad Hedge Market Timing Index and how do you use it to time the markets?

A: It uses a basket of 30 different indicators which constantly changes according to what generates the highest return in a 30 year backtest. It includes a lot of conventional data points, like moving averages and RSIs, along with some of our own internal proprietary ones. When we are getting a reading below 20, we are looking to buy. Any reading over 65 and we are looking to sell, and over 80 we will only go short. It works like a charm. It paid for my new Tesla! I hope this helps.

January 29, 2019

Tech Letter

Mad Hedge Technology Letter
January 29, 2019
Fiat Lux

Featured Trade:

(WHATS BEHIND THE NVIDIA MELTDOWN),
(QRVO), (MU), (SWKS), (NVDA), (AMD), (INTC), (AAPL), (AMZN), (GOOGL), (MSFT), (FB)

What’s Behind the NVIDIA Meltdown

Tech Letter

Great company – lousy time to be this great company.

That is the least I can say for GPU chip company Nvidia (NVDA) who issued a cataclysmic earnings alert figuring it was better to spill the negative news now to start the healing process earlier.

This stock is a great long-term hold because they are the best of breed in an industry fueled by a secular tailwind in GPUs.

But this doesn’t mean they will be gifted any freebies in the short term and, sad to say, they have been dragged, kicking and screaming, into the heart of the trade skirmish along with Apple (AAPL) and buddy Intel (INTC) amongst others.

The best thing a tech company can have going for them right now is to have no China exposure, that is why I am bullish on software companies such as PayPal, Twilio, and Microsoft.

I called the chip disaster back in summer of 2018 recommending to stay away like the plague.

The climate has worsened since then and like I recently said – don’t buy the dead cat bounce in chips because the bad news isn’t baked into the story yet or at least not fully baked.

It’s actually a blessing in disguise if banned in China if you are firms such as Facebook (FB), Google (GOOGL), and Amazon (AMZN).

I recently noted that a material end to this trade war could be decades away and the tech world is already being reconfigured around the monopoly board as we speak with this in mind.

Where do things stand?

The US administration took a scalp when Chinese communist backed DRAM chip maker Fujian Jinhua effectively shuttered its doors.

Victory in a minor battle will likely embolden the US administration into continuing its aggressive stance if it is working.

If you forgot who Fujian Jinhua was… they are the Chinese chip company who were indicted by the U.S. Justice Department for stealing intellectual property (IP) from Boise-based chip behemoth Micron (MU).

The way they allegedly stole the information was by poaching Taiwanese chip engineers who would divulge the secrets to the Chinese company buttressing China in pursuing their hellbent goal of being able to domestically supply enough quality chips in order to stop buying American chips in the future.

Officially, China hopes to ramp up its self-sufficiency ratio in the semiconductor industry to at least 70% by 2025 which dovetails nicely with the broader goal of Chinese tech hegemony.

Fujian Jinhua was classified as a strategically important firm to the Chinese state and knocking the wind out of their sails will have a reverberating effect around the Chinese tech sector and will deter Taiwanese chip engineers to act as a go-between.

According to a research note by Zhongtai Securities, Jinhua’s new plant was expected to have flooded the market with 60,000 chips per month and generate annual revenue of $1.2 billion directly competing with Micron with their own technology borrowed from Micron themselves.

Jinhua’s overall goal was to support a monthly manufacturing target of 240,000 chips spoiling Chinese tech companies with a healthy new stream of state-subsidized allotment of chips needed to keep costs down and build the gadgets and gizmos of the future.

For the most part, it was unforeseen that the US administration had the gall and calculative nous to combat the nurtured Chinese state tech sector.

However, I will say, it makes sense to pick off the Chinese tech space now before they stop needing American chips at all in 5-7 years and when all remnants of leverage disappear.

The short-term pain will be felt in the American chip tech sector which is evident with the horrid news Nvidia reported and the aftermath seen in the price action of the stock.

Nvidia expects top line revenue to shrink by $500 million or half a billion – it’s been a while since I saw such a massive cut in forecasts.

Half of revenue comes from the Middle Kingdom and expect huge downgrades from Apple on its earnings report too.

If this didn’t scare you, what will?

These short-term headwinds are worth it to the American tech sector as a whole.

To eventually ward off a future existential crisis when Chinese GPU companies start offering outside business actionable high quality chips curated with borrowed technology, funded by artificially low debt, and for half the price is worth its weight in gold.

The same story is playing out with Huawei around the globe but at the largest scale possible.

This is what happens when the foreign tech sector is up against companies who have access to unlimited state loans and is part of wider communist state policy to take over foundational technology globally.

I will also emphasize that the Chinese communist party has a seat on every board at any notable Chinese tech company influencing decisions at the top even more than the upper management.

If upper management stopped paying heed to the communist voice at the table, they would be out of business in a jiffy.

Therefore, Huawei founder Ren Zhengfei standing at a podium promulgating a scenario where Huawei is operating freely from the government is what dreams are made of.

It’s not a prognosis rooted in reality.

The communist party are overlords breathing down the neck of Huawei after any material decisions that can affect the company and subsequently the government’s position in the interconnected world.

The China blue print essentially entails a pan-Amazon strategy emphasizing large volume – low cost strategy.

Amazon was successful because investors would throw money at the company until it scaled up and wiped the competition away in one fell swoop.

Amazon is on a destructive path bludgeoning every American second-tier mall reshaping the economic world.

The unintended consequences have been profound with the ultimate spoils falling at the feet of CEO and Founder of Amazon Jeff Bezos, his phalanx of employees as well as Amazon stockholders which are mostly comprised of wealthy investors.

Well, Chairman Xi Jinping and the Chinese communist party are attempting to Amazon the American tech sector and the broader American economy.

The American economy could potentially become the second-tier mall in this analogy and the game playing out is an existential crisis for the likes of Advanced Micro Devices (AMD), Nvidia, Micron, Intel and the who’s who of semiconductor chips.

If stocks reacted on a 30-year timeframe, Nvidia would be up 15% today instead of reaching a trading day nadir of 17%.

What is happening behind the scenes?

American tech companies are moving supply chains or planning to move supply chains out of China.

This is an epochal manifestation of the larger trade war and a decisive development in the eyes of the American administration.

In fact, many industry analysts understand a logjam of failed trade solutions as a bonus to the Chinese.

However, I would argue the complete opposite.

Yes, the Chinese are waiting out the current administration to deal with a new one that might be more lenient.

But that will take another two years and publicly listed companies grappling with the performance of quarterly earnings don’t have two years like the Chinese communist party.

And who knows, the next administration might even seize the baton from the current administration and clamp down even more.

Be careful what you wish for.

Taiwanese company and biggest iPhone assembler Foxconn Technology Group is discussing plans to move production away from China to India.

India is a democratic country, the biggest democracy in Asia, and is a staunch ally of the United States.

CEOs of Google (GOOGL) and Microsoft (MSFT), some of Silicon Valley heavyweights, are from India and American tech companies have been making generational tech investments in India recently.

Warren Buffet even invested $300 million in an Indian FinTech company Paytm.

When you read stories about India being the new China, well it’s happening faster than anyone thought and on a scale that nobody thought, and the underlying catalyst is the overarching trade war fueling this quick migration.

Apple is already constructing low grade iPhones in India in the state of Karnataka since 2017, and these were the first iPhones made in India.

They won’t be the last either.

Wistron, major Taiwanese original design manufacturer, has since started producing the iPhone 6S model there as well.

And it is no surprise that China and its artificially priced smartphones have undercut Samsung and Apple in India grabbing the market share lead.

This is happening all over the emerging world.

And don’t forget if U.S. President Donald Trump revisits banning American chip companies supply channels to Chinese telecom company ZTE. That would be 70,000 Chinese jobs out the window in a nanosecond.

The current administration has drier powder than you think and this would hasten the deceleration of the Chinese economy and also move forward the American recession into 2019 boding negative for tech shares.

Therefore, I would recommend balancing out a trading portfolio with overweights and underweights because it is obvious that tech stocks won’t be coupled to a gondola trajectory to the peak of the summit this year.

It’s a stockpickers market this year with visible losers and winners.

And if China does get their way in the tech war, American chip companies will eventually become worthless squeezed out by mainland competition brought down by their own technology full circle.

They are first on the chopping board because their overreliance on Chinese revenue streams for the bulk of sales.

Among these companies that could go bust are Broadcom (AVGO), Qualcomm (QCOM), Qorvo (QRVO), Skyworks Solutions (SWKS) and as you expected Micron and Nvidia who are one of the main protagonists in this story.