So here’s the thing about rare earth elements – they’re like that one friend who has the only car in your group. Sure, they’re not actually rare (despite the name), but China basically owns the entire supply chain. And this week, they reminded everyone who’s boss.
While you were probably scrolling through your feeds, China quietly tightened the screws on rare earth exports. Now foreign companies need licenses to export anything containing even 0.1% of these materials. It’s like China saying, “Oh, you want to build AI chips and fancy weapons? That’s cute. Here’s some paperwork.”
President Trump wasn’t having it. He basically canceled his upcoming meeting with Xi Jinping and started floating the idea of “massive” tariffs. Because nothing says diplomatic relations like a good old-fashioned trade war threat, right?
But here’s where it gets interesting (and a little weird). While all this geopolitical drama was unfolding, AMD decided this was the perfect time to announce a deal with OpenAI that’s so convoluted, it makes your head spin.
The AMD Deal That Makes No Sense
Picture this: OpenAI wants $60 billion worth of AMD chips. Normal companies would write an IOU for $60 billion. But OpenAI? They convinced AMD to pay them $33 billion in stock warrants for the privilege of maybe getting paid later.
Let me break down this “magical thinking” (as one analyst called it): OpenAI gets warrants that only become valuable if AMD’s stock price goes up. If the stock hits certain milestones, OpenAI can sell those warrants to… pay AMD for the chips they’re buying. It’s like paying for your groceries with a lottery ticket that only wins if the grocery store’s stock goes up.
The kicker? OpenAI doesn’t expect to be profitable until 2029, and only if their revenue magically jumps from $13 billion to $125 billion. Meanwhile, they’re signing deals worth nearly a trillion dollars. It’s the corporate equivalent of buying a Ferrari when you’re still paying off your student loans.
Why This Matters for Your Portfolio
Here’s the thing – we’re seeing classic late-stage bull market behavior. When companies start doing deals that require “magical thinking” to work, it’s usually a sign that everyone’s gotten a little too comfortable with risk.
The rare earths situation is the real story here. These materials are crucial for everything from your iPhone to military drones. China controls about 80% of global processing, and they’re not shy about using that leverage. When geopolitical tensions heat up, tech stocks get nervous – and for good reason.
Smart money is already moving. Rare earth mining stocks exploded this week, with some gaining over 700% on options plays. But the broader message is clear: supply chain vulnerabilities are real, and they can bite fast.
The takeaway? Keep an eye on companies with heavy China exposure, especially in tech. And maybe be a little skeptical when you see deals that sound too good to be true – because they usually are.
After all, in a world where China holds the rare earth cards and companies are making billion-dollar bets on stock price movements, a little healthy paranoia might just save your portfolio.