Dissecting the AMD/OpenAI deal with Eric Fry and Tom Yeung… why it has “magical thinking”… Jonathan Rose’s trading army makes 659% on ALB – in 31 days… Bitcoin as a reserve currency?… how this relates to Project Yorktown VIEW IN BROWSER As I write Friday, stocks are selling off – especially tech. Wall Street is rattled by President Trump’s assertion that China is holding the globe “captive” via its dominance over the rare earth elements (REE) sector. As we’ve covered extensively in the Digest, REEs are critical for our nation’s AI buildout, next-gen weaponry systems, and advanced robotics. China has a stranglehold on global mining, refining, and processing. Our Liberation-Day trade framework with China was supposed to guarantee reliable access to REEs, but Beijing has been dragging its feet. And earlier this week, China clamped down on the REE market yet again. Here’s CNBC from yesterday: Beijing is now requiring foreign entities to obtain a license to export products that contain rare earths worth 0.1% or more of the goods’ value, according to China’s Ministry of Commerce. Companies will also need export licenses if they use China’s extraction, refining or magnet recycling technology… This morning, tensions came to a head with President Trump posting: I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so. Trump went on to characterize China as “becoming very hostile” with its REE restrictions, adding: One of the Policies that we are calculating at this moment is a massive increase of Tariffs on Chinese products coming into the United States of America.
Wall Street is watching this in fear, worrying about the collapse of the U.S./China trade deal framework – and the potential impact on the broader AI sector. Whether this is simply another round of brinkmanship or the start of something more serious remains to be seen. For now, investors are derisking. We’ll keep tracking this. We have more late-stage bull market “crazy” to highlight As a quick refresher, at the end of September, we introduced our “Crazy Map” – a series of milestones that often line the path to a bull market’s eventual peak/bust. Our goal is to track this late-stage craziness to help identify when to take profits off the table and step aside. Here’s a brief recap of our Crazy Map categories along with their respective scorings in our “green (healthy), yellow (elevated risk), red (danger zone)” scoring system: - Speculation over substance: Red
- Easy money and leverage: Red
- New financial products: Yellow
- Retail crowding in: Yellow
- Headline-grabbing deals: Yellow
Our latest story falls into the “headline-grabbing deals” category. You likely saw the headline earlier this week – and the stock price run-up – but you may not be aware of why this “bullish on the surface” story is a prime candidate for our Crazy Map. I’m talking about the deal announced Monday between chipmaker Advanced Micro Devices Inc. (AMD) and OpenAI. On the surface, it’s another blockbuster deal and a massive vote for today’s AI buildout. OpenAI commits to purchase a massive volume of AMD's AI-focused GPUs and hardware. So, AMD gets billions in revenues and OpenAI receives a diversified supply of critical computing power. But there’s more to it – enough for our global macro expert Eric Fry to have immediately recommended his subscribers sell their entire AMD position for a 106.7% gain. Full disclosure – I own AMD. But perhaps not for much longer. Let’s talk about why. The sleight of hand in the deal Eric’s right-hand man, Tom Yeung, just did a deep dive into why this deal raises some eyebrows. Let’s go to Tom’s Fry’s Investment Report update from Tuesday: A company that wants to buy $60 billion worth of products would usually write an IOU for $60 billion. That’s the basic rule of commerce, and it represents roughly the value of 6GW of AMD MI450 chips, assuming a market price of $25,000 each. But OpenAI did the opposite. Instead of an IOU, OpenAI persuaded AMD to issue them 160 million warrants at a cent each. So, AMD is paying $33 billion (10% of its current market valuation) for OpenAI to take the deal. Now, Tom points out that there are still reasons for AMD to do this deal. In my opinion, the biggest is that the deal gives AMD a seat at the big-boy AI table alongside Nvidia Corp. (NVDA), paving the way for more exponential growth. And yet, it’s critical that investors recognize how this deal is structured, what it means for who could be picking up a large chunk of the tab, and what might go wrong. Let’s follow the breadcrumbs… The circular logic in the deal Here are the bottom-line mechanics of this deal: - OpenAI receives warrants for AMD stock…
- The value of those warrants increases as AMD's stock price rises…
- Assuming a rising stock price, OpenAI’s warrants vest at new, higher levels (the final tranche kicks in at AMD selling for $600+, about 163% higher from where it trades as I write Friday)…
- As vesting occurs, it’s likely OpenAI will sell at least some of those warrants, generating some of the cash needed to pay AMD for its chips.
Which did you spot first? The chicken or the egg? Does OpenAI have the cash- and/or revenue-generation potential to pay AMD for its chips purely from its own cash flow? Without a rising AMD stock price that triggers warrant-vesting? It appears highly unlikely (as we’ll dive into below). A substantive part of those payments seems to be based on funds generated through this deal itself, which leans heavily on AMD’s stock price… Recognize the implications for who could be funding a chunk of this deal – waves of new AMD stock buyers who don’t care (or realize) that their shares are being diluted by the vesting warrants. Meanwhile, don’t miss the risk. If Wall Street doesn’t buy into this deal’s “magical thinking,” as Tom characterizes it, and AMD’s stock doesn’t reach its vesting milestones, then OpenAI will be on the hook for billions of dollars to pay for those chips out of its own operational cash flow. So, what’s the potential for that – ruling out a surging AMD stock price that triggers vesting warrants? Here’s Eric from his Fry’s Investment Report Sell Alert: [OpenAI] anticipates no positive cash flow until 2029, and only if revenue miraculously surges to $125 billion by that year – a tenfold leap from today… This AMD deal could be the newest example of OpenAI’s audacious strategy to spend tens of billions of dollars that it does not have… OpenAI is operating at a scale of ambition completely detached from its scale of income. The company expects to generate around $13 billion in revenue in 2025, up sharply from prior years – but still a fraction of the commitments it’s signing. Those commitments are collectively worth nearly a trillion dollars. As noted earlier, given the risks associated with this deal, Eric recommended his Investment Report subscribers lock in 106.7% profits since their March 7 buy date. First, a big congrats to Eric’s subscribers, But second, this is a great illustration of Eric’s general market analysis – it’s the same thinking that resulted in his recent “Sell This, Buy That” AI research package. In it, he reveals – for free – a handful of the specific stocks (some AI) he’s urging investors to sell today, and which to buy instead. You can access it here for free, right now. Circling back to the Crazy Map… Here’s how I initially described the category of “headline-grabbing deals”: We see large numbers of mergers and IPOs that seem focused on “buzz” as much as genuine value creation for shareholders. While not a merger or IPO, you can make a case that this AMD/OpenAI deal is heavily focused on “buzz.” In fact, buzz that drives AMD’s stock higher is a key ingredient. Now, to be fair, the pushback is that this deal aligns incentives between AMD and OpenAI – which it does. Plus, if OpenAI runs into cash-flow problems, it has secured funding and capital commitments from other sources (like Microsoft and Nvidia) that could provide alternative and potentially more reliable payment streams. And, of course, could AMD hit $600? Absolutely! And might this deal be value additive for AMD, OpenAI, and AMD shareholders? Sure! We hope so. But this “creative” deal structure brings risks that investors should recognize. We’re going to keep our “headline-grabbing deals” score at yellow because we expect lots more of these over the coming months. But recognize what just happened – and what it says about this late-stage bull market. Metals continue soaring As we covered at the top of today’s Digest, the REE market is at the heart of tensions today between China and the U.S. Yesterday – and continuing as I write Friday – nearly the entire U.S. REE and critical mineral miners sector exploded higher on news of the China clampdown. Here’s CNBC from yesterday: Shares of U.S. rare earth and critical mineral miners surged Thursday after China tightened restrictions on exports, fueling market speculation that the Trump administration will move more aggressively to invest in building out a domestic supply chain. Veteran trader Jonathan Rose has been all over this rare earths/metals play for months – and just took advantage of this surge to lock in another round of profits. He got his subscribers into the big MP Materials Corp. (MP) move early – and they walked away with a 700% return on one tranche of their options play. Then, not long after, his subscribers closed out their position in NioCorp Developments Ltd. (NB), making about 70% on the trade. And yesterday brought their latest metals win… this time on Albemarle Corp. (ALB). Here’s from Jonathan’s Advanced Notice Profit Alert: Let’s close out our Albemarle (ALB) options here. Shares are up more than 30% since we entered the trade — including a 7% jump this morning after China announced new restrictions on exports of rare earths and lithium-ion batteries — a move that sent lithium names soaring. This has been a fantastic trade, and our position has captured the bulk of the move… With volatility still elevated and the stock running hot, it makes sense to lock in profits here rather than let time decay chip away at gains. Advanced Notice subscribers locked in 659% on one of their call spreads, and 140% on the second. Even more impressive, this was just a 31-day trade – they opened it on September 9 and closed it yesterday. We’ll say it again: Jonathan Rose is one of the best-kept (and most profitable) secrets in the investment industry. If you’re not following him, you’re leaving money on the table. Fortunately, you can follow him – for free – each day the markets are open at 11 a.m. Eastern. That’s when he holds his Masters in Trading: Live daily episodes. They’re a great way to get a sense for Jonathan, his market approach, and the trade setups that have caught his attention. And if you’re interested in learning more about Jonathan’s approach to trading – and how he uses options safely – check out his Masters in Trading Challenge. Don’t worry if you know nothing about options – and if you’re skeptical, even better. The course is all about learning, with Jonathan holding your hand through the concepts until they become like second nature. As he says: You’ve got nothing to prove. You’ve just got to be willing to learn. You can get more information on the Challenge here. Earlier this week, Bitcoin’s legitimacy got a major boost Deutsche Bank’s analysts now argue Bitcoin could join gold as an official reserve asset on global central banks’ balance sheets by 2030. According to Barron’s on Tuesday, Deutsche Bank sees Bitcoin’s volatility falling, liquidity improving, and institutional adoption reaching maturity – in their words, Bitcoin is “almost ready to become a central-bank reserve asset.” Imagine the implications… When sovereign treasuries begin treating Bitcoin much as they do gold, the narrative shifts from “crypto speculation” to “core monetary asset” – and pave the way for huge capital flows. That trajectory matches exactly what our crypto expert Luke Lango has been forecasting behind the scenes with Project Yorktown: a financial reset engineered for the age of digital money. Project Yorktown centers on stablecoins – the plumbing that will connect dollar value to blockchain rails. Stablecoins may be pegged to fiat, but their role is much bigger: They become the pipes that let capital flow seamlessly, globally, and with minimal friction. Luke believes this is where the next wave of financial infrastructure investment will concentrate. So, the fact that Deutsche Bank sees Bitcoin as reserve asset is huge, showing that this isn’t just hype. Bottom line: If central banks are warming to crypto, then stablecoins and Project Yorktown may become the blueprint for how dollars evolve in the digital age. To learn more about this evolving story, you can catch a free replay of Luke’s free presentation right here. We’ll keep you updated on all these stories here in the Digest. Have a good evening, Jeff Remsburg | 
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