Back in the 1990’s, there was a term used called vaporware. Vaporware referred to companies that had an idea, but no tangible products.
Initial public offerings (IPO’s) of vaporware companies were promoted heavily to potential buyers. Many of these offerings had no earnings, revenues or products. Ideas were the sole basis of their pitch and investors clamored to scope them up. Time proved that the passionate pitch to invest in these offerings was ultimately a very bad offer. Investors should have evaluated them using the slogan for Missouri – the show me state.
Roll the clock forward twenty years and we are seeing similar signs of investor passion for dreams. AMD’s price performance shows a high level of enthusiasm to own the company. A quick look at AMD’s track record over the last ten years shows metrics of unhealthy financials that are generally and consistently unfavorable. Impassioned investors are nonetheless inspired and piling into the stock.
It is common to see investors chasing their "dreams" at the top of a market. Dreams are the lifeblood of the passionate. Companies brimming with passion can flourish, but the passion must be balanced with clear headed analysis.
I held AMD in different amounts from 1992 to 2014. Every time it started to do well and get ahead of Intel, Intel brought down the hammer and AMD went back down. Will Nvidia do the same to AMD? That remains to be seen. From my perspective, investing in AMD was an education, not a success.
If you look at AMD’s numbers, you will see revenue, and operating earnings have gone nowhere over the last 10 years. Their debt load is in the mid 60’s (%). If anything goes wrong, AMD will likely be “sucking wind”. From a fundamental standpoint, I just don’t see the attraction.
I don’t vape, so I have no use for vaporware. Like the signs we see in dangerous places, I would say, “Proceed at your own risk!”
