($) 10-K's and Geopolitics: AMD, Intel, Meta Edition
What annual reports can tell us about geopolitical trends
When I published our 2023 annual letter a couple of weeks ago, I reserved a section to talk about the relationship between technology investing and geopolitics. In that section, I posited that the reason why geopolitics matters to technology investing is because there is a natural tension between the inflationary forces of deglobalization and the deflationary forces of generative AI.
So much of geopolitics and the shift towards deglobalization is narrative-based. Quite a bit of investing and capital allocation is narrative-based too. But there are hard numbers and metrics that are available to us all to substantiate (or unsubstantiate) some of the narratives. One source of information is the 10-K’s – the annual report filings that every company publicly-listed in the US must provide publicly.
It is a document that every investment professional reads (or should read). It is a document that most geopolitical analysts probably don’t read (or rarely read). Unlike its quarterly companion, the 10-Q filing, the 10-K’s have many more detailed disclosures and always contain some nuggets of information about a company’s revenue and business trajectory broken down by regions globally. The way regions are delineated are not always consistent. The timing of 10-K filings are also not always the same, because “annual” in this case is defined as fiscal year, not the Gregorian calendar year we use in our daily lives. Nevertheless, these filings share hard numbers that carry legal liability with the SEC – better quality information than adverb-ladened narratives.
To apply this lens to the deglobalization (or decoupling, or derisking) trend between the US and China, I gathered the newest 10K’s of AMD, Intel, and Meta. All three companies are consequential players in generative AI, semiconductors, and global commerce. All three released their respective full fiscal year earnings in the last two weeks, so their 10K’s are hot off the press. All three happen to define their fiscal years along the same dates as the Gregorian calendar year, so we are comparing apples to apples in that sense. While AMD and Intel have broken out its China market revenue for many years (and its Singapore market too, which we will discuss the significance of later), this is the first time that Meta shared details of its China revenue in its 10-K.
Let’s dive in and see what we can learn.