Advanced Micro Devices, Inc. (AMD) Stock Is Sending a Message. Listen.

Unless you’ve been living under a rock, you already know that Advanced Micro Devices, Inc. (NASDAQ:AMD) was one of the hottest comeback stories of 2016. Last year, both die-hard investors and speculators pocketed over 300% returns. Aside from a comeback bounce from the 2008 global financial crisis, AMD stock has never seen such levels.

Advanced Micro Devices, Inc. (AMD) Stock Is Sending a Message. Listen.

Source: Shutterstock

But in the markets, everything can change in a heartbeat. Advanced Micro Devices is learning that the hard way.

So far this year, the AMD stock price is actually slightly in the red since Jan. 1. Missed revenue expectations for the chipmaker’s Q1 earnings report stunted CEO Lisa Su’s otherwise glorious turnaround effort. Advanced Micro dropped about 25% — the worst single-day selloff in a decade.

The company suffered further disappointment when rumors about a GPU licensing deal with Intel Corporation (NASDAQ:INTC) were flatly denied. Intel previously had a contract with Nvidia Corporation (NASDAQ:NVDA), but that expired in March of this year. Speculation was rampant that Intel would go with Advanced Micro Devices.

AMD stock jumped on the rumor, but fell apart after Intel said it was untrue. Additionally, Ms. Su gave no indication of the deal in her corporate presentation to Wall Street analysts.

Ordinarily, such denials would arouse heartache. Apparently, AMD stock is no ordinary investment. Rather than avoiding the chipmaker, a considerable number of analysts are urging investors to double down.

Should you do the same?

Worrying Headwinds for AMD Stock

Wall Street’s analyst community is absolutely no help, with the majority (52%) of those covering the stock ranking it a “Hold.” To be fair, though, only a small handful are bearish, with most of the remainder bullish. But that’s a big undecided camp.

This stalemate of perspectives is our first clue that strongly directional guidance should be avoided. If market pros can’t form some sort of solid consensus, it’s difficult to have confidence — in either direction.

AMD’s financial situation isn’t glowing, either, with the company still trying to figure out a way to churn out profits. Su is putting together a fantastic turnaround story that has Advanced Micro on the right path, but the semiconductor industry is insanely competitive, and scraping together higher margins is difficult.

But my biggest worry is the worst-case scenario of a prolonged industry downturn. AMD simply doesn’t have the resources of some of its better-heeled competitors. Artificial intelligence and autonomous driving, among other emerging technologies, should help stave this off, and then there’s AMD’s core strength — gaming — which is holding strong. But there’s no questioning the difficulty of the PC market’s deflationary environment.

Technical Trouble Ahead, Too?

Of course, even if I am right and the fundamentals don’t make the case for a turnaround in shares right now, AMD stock is always good for a technical bump here and there.

Except the charts aren’t really setting up well at the moment, either.

AMD is currently stuck underneath a declining 50-day MA that it lost as support back in April, and a declining 20-day MA is also beating the stock back. A slightly rising 200-day moving average at least provides downside support — at some point, if AMD coils up enough, we could see a technical catalyst, but we’re a ways away from that.

AMD stock chart

Additionally, between December 2016 and now, AMD has formed a bearish-looking head-and-shoulders pattern, which gives me more pause.

Bottom Line on AMD Stock

Something important to point out about all the bearish arguments above: None of them are particularly strong. They’re legitimate, but there’s nothing about Advanced Micro that screams “sell” or “short” right now.

It’s just that nothing screams “buy” either.

For now, common sense is our best friend. AMD stock had a groundbreaking 2016, and asking for lightning to strike twice is a low-percentage bet. The outlook for semiconductors has improved from prior years, but that doesn’t mean the industry is welcoming right now, and that doesn’t mean Advanced Micro wouldn’t look better from lower prices.

For now, simply avoid AMD and wait for either a more compelling valuation case, continued improvement in the fundamentals or a shift in the technical landscape. Right now, this is a no-man’s land.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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