The semiconductor chip sector is trading on a downtrend for good reason: the cyclical downturn is somewhere at the first quartile or half way through. Until demand and supply imbalances meet, stocks like Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) will either trade lower or move within a narrow range. Oddly enough, when Apple pulled tech stocks lower, AMD stock fell by just as much, down by around 10%. What does Apple’s worsening prospects have to do with AMD’s future?
Apple’s lack of safety shook market confidence. Even though weaker smartphone sales could lead to consumers re-budgeting for a new computer, markets looked at it another way. If Apple’s revenue misses by a wide margin due to the trade wars, AMD, Intel (NASDAQ:INTC), Applied Materials (NASDAQ:AMAT), and Micron (NASDAQ:MU) will face the same headwinds, if not worse.
AMD will ultimately move in random fashion until it reports quarterly results later this month. AMD will likely report another strong quarter of CPU sales in the consumer space and EPYC sales in enterprise. Its GPU division will disappoint. Nvidia is flooding the market with Turing cards, putting pressure on prices. Once cleared in three to four months, AMD’s chances of holding a rally improve.
