One only has to look at the news coverage of Advanced Micro Devices (NASDAQ:AMD) and the subsequent rise and fall of AMD stock to appreciate the idea that sometimes there’s such a thing as too much story.
Nobody loves a stock with a juicy story any more than I do. Indeed, the bulk of my career has been turning relatively boring numbers into a meaningful, riveting narrative.
I’ve got to be honest though. Sometimes in the interest of making art, the world’s financial media machine inadvertently unleashes a dangerous beast.
Largely left for dead as of early 2016, AMD’s regrouping effort caught a lot of investors, as well as rivals like Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC), by surprise. The financial news business loves redemption stories almost as much as it loves a good fall from grace, and we had no problem adding a sizzle to the steak.
That’s fine. It’s just the nature of the business. In our effort to spin a good yarn, however, I can’t help but wonder if we’ve left AMD far too subject to the next headline, and far too unreflective of just how much money this company is likely to earn in the foreseeable future.
And now we’re having a tough time putting the genie back in the bottle.
Don’t misread the message. It’s not that market commentators and stock-pickers aren’t allowed to have and voice an opinion on Advanced Micro Devices. By and large though, the industry’s professionals have been just as enamored by AMD, or just a critical of it, as the amateurs have been.
Perhaps worse, AMD stock has been good about responding to the daily headlines. It’s a headache simply because the rhetoric seems to change on a pretty regular basis.
Don’t take my word for it. Just check out this sampling of unusually-opinionated commentary just from the past couple of weeks.
- AMD, Nvidia stocks rise after Mizuho says GPU prices are rebounding (11/28)
- AMD’s Breakdown Seen Sparking 16% Stock Decline (11/20)
- AMD stock drops 6% after hours, following Nvidia GPU inventory issues (11/15)
- Advanced Micro Devices Stock Makes a Strong Contrarian Case (11/13)
- Why AMD’s Stock Rebound Won’t Last (11/8)
- AMD stock keeps rising amid push into Amazon cloud, valuation debate (11/7)
- AMD Stock Rises As Amazon Web Services Uses Its Epyc Chips (11/6)
What the [insert explicative of your choice here]? You could get dizzy/whiplash if you’re watching the headlines a little too closely.
And the stock mostly has moved in step with each shift in the prevailing opinion, though simultaneously, it’s made even bigger moves in step with the shifts in the bigger-picture themes the financial media has latched onto.
AMD soared more than 40% between August and September on the assumption that its new-and-improved portfolio would finally yield considerable profits. Shares have given all of that gain back with an alarmingly brisk pullback in the meantime though, as investors faced the reality minting money just yet.
Investors, in short, have been taken on a wild ride that wouldn’t have been quite so wild if all of us had kept a little perspective. We let the hype shape our assumptions, rather than reality. Trained to trade it though, too many of us are more worried about the next headline than figuring out next year’s plausible bottom line growth.
Bottom Line for AMD stock
The frustrating irony is, Advanced Micro Devices truly has rekindled its former greatness. It’s going to beat Intel to the 7 nanometer finish line by a country mile, and though Nvidia is still the king of the GPU market, AMD is positioned to make a measurable dent in its dominance come 2019. Credit has to be given where it’s due.
None of that really matters right now though. Right the only thing that matters is making the right call on which way the next swing is pointed. Fundamentals (yep, they still matter, even here in late-2018) have yet to become part of the equation again.
It’s not a condition that will last forever; eventually traders will tire of playing the game. In the meantime though, ignoring the fact that AMD stock has been hijacked by fear and greed could prove destructive to your portfolio’s value.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.