After breaking out above $15 a share at the start of June and topped at over $17, the stock is now taking a round-trip back. After short-covering lowered the short float to 17.83 percent, where will AMD (NASDAQ: AMD) head next as selling volume lightens up?
Uncertainties for chip stocks are a macro headwind not only for AMD but for widely-traded stocks like Micron Technology (NASDAQ: MU), Intel (NASDAQ: INTC), and Nvidia (NASDAQ: NVDA). The U.S.’s attack on China’s alleged IP theft followed after China delayed its decision on the Qualcomm (NASDAQ: QCOM) / NXP Semiconductor (NASDAQ: NXPI) deal.
Intel’s stock drop from over $57 to below $50 is understandable after the company fired its CEO. Oddly enough, Intel did not use the company’s market share loss in the PC space to AMD as the reason for the move. But AMD’s stock is not trading at reasonable valuations compared to Intel: its forward P/E is double that of Intel’s at 24 times.
Even though EPYC and Ryzen’s refresh assures more market share growth, those assumptions are priced in the stock. Analyst upgrades in the last two months also suggest the late recommendations will not help the share price.
AMD’s downtrend will eventually end, with its share price going up in the long-term. Before that happens, uncertainties will add volatility to its stock.
Disclosure: Author owns shares of NXPI.
