Don’t look now, but Advanced Micro Devices, Inc (NASDAQ:AMD) just got a major shot across the bow by short investors that should have those in the bull camp questioning how long they hang on to their AMD stock.
“Short Interest in shares of Advanced Micro Devices, a semiconductor manufacturer, reached an all-time high this week,” Brett Weiss, director at S3 Partners, a financial analytics firm said. “S3 Partners real-time short interest analytics calculates that the real time dollars at risk, on the short side, is $2.02 billion. This is an increase of 83% in shares and 105% of dollars at risk, just since the beginning of 2017.”
Interestingly, despite the record short interest in AMD stock, just 18% of the company’s float is being shorted compared to 37% for Avis Budget Group Inc (NASDAQ:CAR), a business you would think is far more resistant to short attacks.
Alas, we’re talking about two entirely different situations that aren’t comparable. Two that are comparable are Nvidia Corporation (NASDAQ:NVDA) and Intel Corporation (NASDAQ:INTC), which, as of Sept. 26, have 3.1% and 2.5% of their float short, respectively.
AMD Stock is the Short Play
If you go solely by the short interest of the three stocks, Advanced Micro Devices is the favorite despite the fact the actual dollars at risk for Nvidia ($3.2 billion) and Intel ($4.7 billion) are higher than the little over $2 billion for AMD.
The interesting aspect of AMD’s short interest is that the AMD stock price continues to keep up with NVDA, despite a 6.1% increase in the number of AMD shares shorted — 158.1 million on Sept. 15 versus 149.0 million on Aug. 31 — over the past two weeks.
Yet, from Aug. 31 through Oct. 3, AMD stock is up 3.2%, compared to 5.9% for NVDA stock over the same period. And both are higher than the 2.7% return for the SPDR S&P 500 ETF Trust (NYSEARCA:SPY).
If the shorts are trying to break AMD, it doesn’t seem to be working.
Technical Analysts See It Differently
To get a sense of what some of InvestorPlace’s technical analysts are thinking regarding AMD stock, I’ve gone straight to the source.
“Time will tell if today’s breakout can go the distance but there’s no denying the wind is at buyers’ backs right now,” InvestorPlace’s Tyler Craig wrote Oct. 3 discussing AMD’s action that day. “In sizing up potential targets, the next two resistance levels worth watching are $14.25 and then $15.25.”
There’s no mention of $12.25 or $11.25 by Craig, so clearly he feels momentum will take AMD stock higher leading up to the company’s third quarter earnings report Oct. 26.
My second expert opinion comes from InvestorPlace contributor Bret Kenwell.
From a fundamental perspective, Kenwell believes that Advanced Micro Devices is a much stronger company than it was 18 months ago. Thanks to the company’s new Vega line of chips, revenues are expected to continue growing while delivering higher margins. Valuation-wise, Kenwell thinks AMD stock is somewhat pricey — but the same can be said for Nvidia and Intel, so that’s a wash in his opinion.
“I advocate buying shares near current levels and using a stop-loss just below the 200-day moving average or the $12 level,” Kenwell stated October 2. “On the upside, I’m targeting $14, where AMD stock fell sharply just a few trading sessions ago…. Target #2 is $15.50, which has offered stiff resistance in 2017.”
Now, remember, Kenwell’s coming at this from a trader’s perspective, but he does feel AMD currently provides all investors a good risk/reward profile.
What I Think About AMD Stock
I said it in May, again in September, and I’ll say it once more in October. I believe NVDA will hit $200 before AMD hits $16.
So far, NVDA hasn’t been able to shake AMDs tail, which is great news if you are an AMD shareholder.
However, the recent $19 increase in Nvidia’s target price to $200 by SunTrust Robinson Humphrey analyst William Stein Oct. 2 should help put some wind in Nvidia’s sails. Furthermore, the analyst doesn’t see Tesla Inc (NASDAQ:TSLA) buying AMD chips as much of a problem for Nvidia — and other analysts agree.
Bottom line, I think if you own AMD, you’ve also got to own NVDA. Whether by owning both stocks or the use of options or through a semiconductor ETF, it’s the safer bet.
Do I think the shorts are right?
Unless AMD craps the bed when it announces earnings at the end of the month, I don’t see this stock going below $12 anytime soon.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.