If I’ve learned anything in my years of market analysis, it’s that writing about certain companies can be hazardous. This is a sentiment shared by our contributor James Brumley whenever the topic is Advanced Micro Devices, Inc. (NASDAQ:AMD). Going bearish, even the hint of pessimism, toward AMD stock is enough to attract catcalls and internet trolling. It’s going to be a long week for both of us.
The level of vitriol associated with Advanced Micro is, to be blunt, astonishing. In some cases, I’ve witnessed more civility in the rough-and-tumble sector of sports editorials. Apparently, I’ve got quite a following on Reddit from those who are dedicated to seething at my latest AMD write-up. If I don’t write something glowingly positive about the AMD stock price, I’ll be sure to hear about it.
Ah yes, welcome to the world of equity fandom. This extracurricular activity is part of the reason why I don’t really discuss Apple Inc. (NASDAQ:AAPL) unless I have a compelling reason to do so. Still, a helpful barometer in analyzing AMD stock is the amount of unreasonable banter associated with it.
A good rule of thumb is to never get too emotional about any opportunity. All publicly-traded assets go through bullish and bearish phases. That so many people are egging the AMD stock price forward suggests a kind of desperation with which I’m uncomfortable.
As Brumley notes in his article, AMD shares fell to a critical technical support line. As he puts it, “The bears are still holding Advanced Micro Devices shares close to the edge of that technical cliff. One more bad day could do the trick, starting the next wave of selling.”
I don’t want to beat a dead horse or rehash the same argument multiple times. However, this is at least my 12th time writing about the AMD stock price. I’ve been bearish before, but I’m most concerned about long-term shareholders at this juncture.
As Brumley mentioned, Advanced Micro is sitting on a precipice. A terrifying 7.5% drop to start off the week got the AMD stock price there in the first place. The magnitude of this decline is a huge deal. Only one other same-day trading performance in this year was worse. That dubious distinction occurred on May 2, when AMD tanked 12%.
The optimist may counter that shortly after the May 2 collapse, AMD recovered rapidly. Eventually, shares hit an intra-day high this year of $15.65 on July 26. Presumably, the expectation among the bulls is that a similar pattern will erupt.
Maybe. As a technical guy myself, I recognize the value in repeating patterns. The markets don’t replicate their moves precisely, but they sometimes come very close. If you’ve bought into AMD stock at recently elevated levels, you need this thesis to pan out.
But as someone who has no stake in AMD — other than I hope the company itself sticks around to produce more crypto-mining graphics processing units — I’d be hesitant to put too much money at risk. To me, this is a 50/50 proposition at best.
Remember, bad news took us down to where we are. Brumley is absolutely correct. All the bears need now is a little bit of bad news to significantly damage the AMD stock price. Moreover, I think the opposite is true: For AMD to rise, it needs a whole lot of good news.
Here’s the bottom line: Fundamentally, I’m not sure where that good news will come from. We can talk all day about AMD’s product pipeline. But it’s not like competitors such as rival Nvidia Corporation (NASDAQ:NVDA) are incapable of responding. More worryingly, chip-making giant Intel Corporation (NASDAQ:INTC) is muscling into Advanced Micro’s territory.
With so many exciting developments in technology, whether it be cloud computing, data centers, artificial intelligence, and the blockchain, Intel and company want a (very large) piece of the pie. Of course, AMD is a relevant competitor, but to maintain its edge will cost money. Compared to the stalwarts, the financials aren’t necessarily AMD’s strong suit.
Given some of the broader context, it’s not surprising why Wall Street lost confidence in the AMD stock price. And seemingly, the only source of confidence remaining are the AMD trolls leaving nasty-grams on internet forums. I’m going to need a lot more than that to open up my wallet. I suspect many other investors feel the same way.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.