Chip Trouble Ahead

📟 AMD beat earnings but warned of a $700 million hit due to tariffs, signaling what’s to come for the chip industry.

May 07, 2025

Silver banana goes to





In this issue of the peel:

  • đŸ˜¶ U.S. stocks continued to pull back and bonds gained as the animal spirits of the prior two weeks wears off.

  • 📟 AMD beat earnings but warned of a $700 million hit due to tariffs, signaling what’s to come for the chip industry.

  • 🏩 The Fed is meeting, and traders are almost 100% confident we won’t see rate cuts anytime soon.

Market Snapshot

Banana Bits

9 Amazon Prime Perks You Need to Be Using

  • Are you taking advantage of your Amazon Prime perks? Whether you’re already a Prime member or considering signing up, here are 9 Prime member benefits you should be using!

  • Once upon a time, we had to make lists with paper and pen and physically go to stores when we needed things. Sometimes we’d have to go to several stores or even shopping malls for what we needed. Then one day, out of the heavens, came Amazon. For many of us, the free shipping perk and access to exclusive shows and movies is enough reason to fork over the $14.99 per month to get Prime. But if those reasons haven't been enough to entice you to join Prime, maybe some lesser-known incentives like free music/podcasts, access to lightning deals, and Whole Foods discounts will tempt you to sign up. Make sure you're not missing out, and get the most out of your Prime membership with help from our deal-finding experts.

Macro Monkey Says

Fed Decision Day

Jay Powell’s favorite time of year is coming. He gets to emerge from his desk, speak to millions of people about whether the Fed will cut or not, and explain why, and inevitably have half of those people be angry at him regardless of the decision. 

That’s the price of being in the big seat, though. Traders and investors will be hunched over today at 2pm to hear the Fed say, “Not yet, folks.” 

The Fed Funds Rate (the rate at which banks lend to each other overnight) has been holding steady in the 4.25% to 4.50% range for a few months. That level has been pinching wallets and deflating dreams of cheap mortgages since last year. 

Traders used to bet the Fed would start slashing rates as early as March. Then they moved their bets to May. Now? July’s the new maybe, and even that’s looking a little wobbly depending on how inflation behaves.

Why the delay? Inflation is relentless. Well, to be fair, it’s not crazy. Core PCE has been in the 2.5%-2.6% range, which isn’t that far off from the 2% goal. But the Fed is still seeing prices that are a little too high for their liking, and the job market—while softening a bit—is still strong enough to keep wage growth and spending afloat. 

Plus, a surprise surge in energy prices and sticky shelter costs haven’t helped the case to ease up.

Meanwhile, the Fed has been facing political pressure, with Powell being nudged to drop rates, hoping cheaper borrowing can grease the wheels of economic optimism in time for November. Powell has been trying to keep the Fed out of the political sphere. 

The Takeaway?

Don’t get your hopes up. Today’s event should be another standard, boring one. So don’t expect fireworks from this Fed meeting. No rate cut, no dramatic plot twist—just a continued wait for inflation to chill out and data to give the green light. 

Investors will be glued to Powell’s post-meeting comments for any subtle clues (or Freudian slips) about what’s ahead. 

Career Corner

Question

Might be a stupid question, but could an associate who started less than 1 month ago ever have the ability to give a referral?

Answer

Likely yes. You don’t know their history with that group or its individuals. Could’ve been a summer intern, could’ve worked previously with the group head, etc.

Head Mentor, WSO Academy

What's Ripe

Hims & Hers (HIMS) 18.1%

  • It’s not often that the market gives you a break. In fact, it's extremely rare. Investors are pretty unforgiving when it comes to earnings hiccups. But HIMS got a chance at redemption. 

  • Despite reporting disappointing earnings, the stock reversed earlier losses after investors came to their senses and realized that even though they didn't meet the high expectations, sales more than doubled in its first quarter, boosted by a 53% jump in revenue per subscriber. 

Upwork (UPWK) 18.0%

  • Upwork’s business model seems to be “working” just fine after beating both top and bottom-line expectations. They also raised the full-year EPS guide. Notably, their Business Plus offering is gaining traction, with active clients more than doubling quarter over quarter.

What's Rotten

Bellring Brands (BRBR) 19.0%

  • BellRing Brands, the maker of protein bars and shakes for college-aged meatheads, crushed earnings with sales up 18% year-over-year. But the hype was short-lived as guidance came in below the midpoint. When gym bros said that gains last forever, they must not have been talking about stock gains.

Moderna (MRNA) 12.3%

  • Pharma stocks are the wild west. When they work, they REALLY work. And when they don’t, they blow up your entire portfolio and get multiple people fired with rapid precision. Pharma stocks are getting hit because the FDA appointed a long-time critic of COVID-19 mandates and the pharmaceutical industry overall.

Thought Banana

AMD Paving The Way 

Advanced Micro Devices reported Q1 2025 earnings, and the results were a blend of high-fives and head-scratches. 

The company reported EPS of $0.96 on revenue of $7.44 billion, surpassing Wall Street's expectations of $0.94 EPS and $7.12 billion in revenue. This performance was fueled by a 57% year-over-year surge in the data center segment as AMD continues to ride the AI wave.

However, the report, while a blowout, wasn’t without some controversy. That has become all too common for the chip industry with negative headlines after negative headlines. 

During the earnings call, CFO Jean Hu disclosed that new U.S. export restrictions on advanced AI chips to China could dent AMD's 2025 revenue by approximately $1.5 billion for the fiscal year. Additionally, the company anticipates an $800 million charge related to inventory and purchase commitments affected by these tighter export controls.

Despite these challenges, AMD remains optimistic. The company forecasts Q2 revenue of around $7.4 billion, slightly above analysts' estimates of $7.22 billion. 

CEO Lisa Su (who, it should be noted, is the cousin of Nvidia’s CEO, which is an insane genetic anomaly) emphasized AMD's robust product portfolio and consistent execution as key drivers positioning the company for strong growth in 2025.

The Takeaway?

AMD's Q1 results showcase its strength in the data center and AI sectors, but geopolitical headwinds are creating turbulence. While the company's core business remains solid, the impact of export restrictions introduces uncertainty. Investors should keep an eye on how AMD navigates these challenges in the coming quarters.

The Big Question: Can AMD’s AI growth outpace the cost of geopolitics and export bans?

Banana Brain Teaser

Previous

The harvest yield from a certain apple orchard was 350 bushels of apples. If x of the trees in the orchard each yielded 10 bushels of apples, what fraction of the harvest yield was from these x trees?

Answer: x/35

Today

What is the smallest integer n for which 25^n > 5^12?

Send your guesses to [email protected]

❝

Getting turned down isn’t failure. It’s just the market telling you to reprice and keep bidding.

Wall Street Proverb

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Happy Investing,
Chris, Vyom, Ankit, Mithun, & Patrick