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AMD's Earnings & Why Stocks Are Surging Today
· Summarized
Key takeaways
- The speakers argued that election certainty, rather than a particular party’s platform, often drives the immediate market rally; long-term investors should not build portfolios around political outcomes.
- AMD’s $13 billion-plus revenue, $2.09 adjusted EPS, and record $8.5 billion data-center revenue show that AI infrastructure spending is translating into current business results.
- AMD’s report does not settle whether AI spending will generate attractive returns: backlog conversion, productive use of infrastructure, and future ROI remain open questions.
- CVS’s planned 2028 split separates retail pharmacy from Caremark, Aetna, and premium-care assets, but neither resulting company is an obvious purchase because each retains substantial competitive and regulatory problems.
Summary
Why the post-election market rally is not a political verdict
Travis says the podcast is not making a political judgment, but elections affect markets. Lou notes that futures fell overnight and then stocks surged on the same information, calling it proof that thin futures markets are unreliable. Motley Fool data shows the average 12-month post-election return is 14%, versus 11% for a random 12-month period, because markets prefer certainty to not knowing what they must handle. Rachel adds that the S&P 500 has risen after all 19 U.S. midterm elections since 1950, averaging about 15%.
Why long-term investors should ignore party-based trading rules
Rachel cites a hypothetical $10,000 S&P 500 investment from 1953 through 2024: it grew to roughly $100,000 if invested only during Republican presidencies, $500,000 during Democratic presidencies, and more than $1.4 million when continuously invested regardless of party. She says business performance, monetary policy, inflation, diversification, and time horizon matter more than election outcomes. Lou agrees, recalling that solar stocks often moved opposite to what election-based intuition predicted. He warns that campaign slogans are easier than legislation and says knee-jerk political trades are usually wrong.
AMD’s results show AI spending is producing revenue, but not yet proven returns
Rachel calls AMD’s report excellent: revenue exceeded $13 billion, adjusted EPS was $2.09 versus a $1.95 consensus estimate, and data-center revenue nearly doubled year over year to a record $8.5 billion. Microsoft, Meta, and Alphabet are buying chips at historic rates, while demand for server CPUs is also rising because agentic-AI applications such as Meta’s Muse require powerful CPUs for autonomous virtual machines. CEO Lisa Su said CPU and GPU growth are moving together, and AMD guided to $17 billion in fourth-quarter revenue.
AMD strengthens the AI trade but may signal tougher growth for Nvidia
AMD says it has re-engineered its supply chain and secured wafers, advanced-packaging substrates, and high-bandwidth memory to more than double data-center revenue through 2027. Rachel sees tangible earnings as evidence that AI infrastructure is building real software and hardware demand, not merely absorbing big-tech spending. Lou pushes back that the report only proves the music has not stopped: backlog conversion, productive revenue, and return on investment remain unanswered. He does not see AMD as a bear case for Nvidia, but thinks Nvidia’s best AI-driven growth may be behind it as AMD, TPUs, and Amazon’s Trainium expand.
CVS plans to undo its decades-long vertical consolidation
CVS will split into two publicly traded companies, with the separation targeted for early 2028. CVS Pharmacy will contain the retail business, including thousands of drugstores, MinuteClinics, and pharmacy operations; CVS Health will combine Caremark, Aetna, and premium-care assets. Rachel says the 2018 Aetna acquisition exemplified the strategy of combining drugstores, medical care, and insurance, which has not created long-term shareholder value. Legislative scrutiny of integrated pharmacy-benefit-manager and insurance models may make a breakup attractive, but both businesses still face serious challenges.
Neither CVS spinoff looks like an obvious investment
Rachel says the retail company will still face Amazon and other digital competitors, while the insurance side faces rising utilization costs and changing government reimbursement. Lou argues that CVS tried to address problems in U.S. healthcare but created new conflicts of interest, particularly when the same company controls pharmacies and pharmacy-benefit management. He finds the insurance, PBM, and senior-clinic combination more intriguing because of its Medicare exposure, but says healthcare remains difficult. Both speakers doubt CVS Pharmacy will remain a strong standalone public company over the long term.
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Show notes
Stocks are rallying after the midterm elections, but does the outcome really matter for long-term investors? AMD's blockbuster earnings show that AI infrastructure spending is still accelerating, even as questions about returns on investment remain. Plus, CVS announces plans to split into two publicly traded companies, potentially unwinding decades of consolidation.
Travis Hoium, Lou Whiteman, and Rachel Warren discuss:
- Today's Market Pop
- Elections and Stocks
- AMD's AI Earnings
- AI Infrastructure Spending
- CVS's Breakup Plans
- Healthcare Industry Consolidation
Companies discussed: Comfort Systems USA (FIX), Advanced Micro Devices (AMD), Microsoft (MSFT), Meta Platforms (META), Alphabet (GOOGL), Nvidia (NVDA), CVS Health (CVS), Amazon (AMZN).
Host: Travis Hoium
Guests: Lou Whiteman, Rachel Warren
Engineer: Dan Boyd
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