Advanced Micro Devices, Inc. (NASDAQ: AMD) is having a rough day in the market today, and for good reason. Trump announced a potential new tariff that is leading to some major concern for the company. With concerns that prices may be forced to rise and sales could slump, concerned investors are sending the stock tumbling downward. Today, we’ll talk about:
- The potential tariff that could lead to some pain for AMD;
- why the tariff is bad news for the company;
- what we’re seeing from the stock as a result; and
- what we’ll be watching for ahead.
The Potential Tariff That Could Lead To Pain For AMD
Recently, we have been in the midst of what seems to be becoming a trade war, and Advanced Micro Devices just took a big hit as a result. The declines are ultimately the result of a list of about 1,300 Chinese exports that was released by the Trump Administration. When releasing the list, the Administration said that these Chinese exports could be targeted for tariffs. In fact, many believe that a 25% tariff will be imposed on these exports in the midst of this trade war.
We’ll get into why this could hurt AMD later, but before we do, it’s important that you know why it’s happening in the first place. In an attempt to protect the competitiveness of US companies, Trump announced a tariff on imported steel and aluminum that dropped some jaws. This tariff is bad news for China, Canada, and others who have reacted with harsh comments about the move.
Nonetheless, yesterday, China reacted in a big way, announcing tariffs on $50 billion in U.S. goods ranging from soybeans to aircraft. Ultimately, the list of Chinese exports to be targeted for tariffs was the Trump Administration’s tit-for-tat reaction to the news of Chinese tariffs.
Why The Tariff Is Bad News For The Company
At first glance, this doesn’t seem like it would be bad news for AMD, but when you dig in, you quickly start to realize that it is. At the end of the day, Advanced Micro Devices’ products are products that are largely made in China. As a result, AMD products are going to be right in the midst of this trade war. Many believe that the trade war will lead to an increase of 10% to 12% in the price of AMD products, leading to decreased demand and lackluster sales. Whether or not this will actually be the result is yet to be seen, but there’s no denying the fact that this is a very valid fear!
What We’re Seeing From The Stock
As mentioned above, Advanced Micro Devices isn’t having a good day in the market today, as one would imagine considering the concerns surrounding the tariffs. Of course, our partners at Trade Ideas were the first to alert us to the declines. Currently (8:35), AMD is trading at $9.13 per share after a loss of $0.42 per share (4.40%) thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on AMD. In particular, we’re interested in following the news surrounding the trade war and we’ll be following the data closely to see how this trade war affects the price of and demand for the company’s products. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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