Why AMD Stock Is Down, Not Out

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The case for Wall Street having gotten ahead of itself has entered more than a few conversations. Especially in many large-cap tech companies. But an argument the market is made up of individual stocks ‘still’ in position for buying is easy to appreciate if investors’ searches land on Advanced Micro Devices (NASDAQ:AMD) and AMD stock. Let me explain.

Image of the Advanced Micro Devices (AMD) logo outside of a corporate building
Source: Sundry Photography / Shutterstock.com

Apple (NASDAQ:AAPL). Tesla (NASDAQ:TSLA). Nvidia (NASDAQ:NVDA). Zoom Video (NASDAQ:ZM). Look at those stocks and a blanket observation would rightfully be the market is on fire. All those tech giants have hit new record highs for the past one or more months while generating double and even triple digit returns in 2020 for their shareholders.

And in no uncertain terms the large-cap, tech-heavy Nasdaq Composite’s own gains in excess of 60% off March’s historic Covid-driven bottom, and 15% year-to-date return, is a direct consequence of investors current enthusiasm for AAPL, TSLA, NVDA, ZM stock, and many of their index constituents.

Surely the market is overbought, right? In some obviously popular ways, yes it is. But it’s not that black and white. Investors don’t need to look very far to find value at this very moment if among those tickers one clicks on peer AMD.

AMD Is About Quality

After demonstrating early leadership in the aftermath of Covid-19 bear market this spring, shares withered. And with AMD off about 2.50% during Thursday’s session, the stock is roughly 5% below where it was two full months ago on April 16 as it came within a whisker of its pre-coronavirus February high.

What gives? Why is Advanced Micro Devices under pressure? Wall Street could be concerned with AMD’s relative valuation. By some accounting measures rival Nvidia, and one of today’s aforementioned championed stocks, is still cheaper. And compared to Intel (NASDAQ:INTC), the world’s largest semiconductor outfit? Forget about it. AMD appears outlandishly expensive. But is that really bad?

The fact of the matter is in investing, as with other aspects of life, you also get what you pay for. And more often than most would care to accept, the best growth stories like AMD almost always look expensive and are widely pooh-poohed until they’re not. Fabled quadruple digit returns rarely, if ever, are accompanied by a dinner bell ringing.

With proven leadership at AMD’s helm, enviable growth, continued well-deserved stealing of CPU and GPU market share from the competition, and gaming console catalysts waiting in the wings later this year, there’s little doubt AMD stock will get pulled from today’s bargain bin and once more, turn fashionable with investors.

AMD Stock Weekly Price Chart

Advanced Micro Devices (AMD) weekly stock chart readying to break out


Source: Charts by TradingView

As inferred above, it has been a tough couple months for AMD shareholders. But the flip side of relative and now absolute price weakness is opportunity for tomorrow’s investors. Alongside Advanced Micro’s solid business prospects, today’s technical ennui is building a solid-looking platform for the stock to break out from.

Despite a couple failed bases this year, AMD remains well-positioned within a larger uptrend. At the end of day, those failures have produced an area of lateral congestion within the larger bullish channel that has impressively found support three times off its prior high set in 2000.

Now and with the weekly chart signaling a bullish stochastics crossover in neutral territory, the case for a new growth phase in shares is reasserting itself. Investors could attempt to wait and try to time an actual breakout. I get it. But if you’re a like-minded, risk-averse investor with an earnings catalyst also entering the equation in less than two weeks, buying shares today hedged with a highly-flexible collar strategy continues to make sense.

Investment accounts under Christopher Tyler’s management owns positions in Advanced Micro Devices (AMD) its derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2020/07/why-amd-stock-is-down-not-out/.

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