It has been an up-and-down couple of days for Advanced Micro Devices (NASDAQ:AMD). Shares fell more than 9% on Wednesday after the company’s earnings disappointed investors. After a slow start on Thursday, though, AMD stock has largely made up those losses.
Currently, shares are up by about 7%. And at the high? AMD was up more than 12%.
Surprisingly, this rally isn’t happening amid a particularly promising backdrop. The Federal Reserve raised rates Wednesday afternoon with the market closing near its low. So far, the market has continued lower on Thursday, too. This comes amid ongoing worries regarding regional banks.
So, why is AMD stock surging?
AMD erupted higher in mid-day trading today following headlines related to artificial intelligence ( ). While Nvidia (NASDAQ:NVDA) seems to get all the credit for its AI ambitions, AMD hasn’t gotten much love regarding the new technology. Now, though, Microsoft (NASDAQ:MSFT) is apparently working with AMD. Reports suggest that Microsoft is “helping to pay for the semiconductor company’s push into processors used for artificial intelligence workloads.”
While Microsoft still uses Nvidia chips for its AI ambitions, it appears to be looking for AMD to become a partner. Per Seeking Alpha:
“[Microsoft’s] deal to help pay for the chips is part of its further push into AI […] In addition, [Microsoft] is also working with [AMD] on its own AI chip, internally known as Athena.”
Adjusted Expectations for AMD Stock Now?
Semiconductor bulls were looking for AMD to keep the party going when it reported earnings on Tuesday evening. The company delivered top- and bottom-line beats and investors seemed to be willing to overlook the fact that revenue fell about 9% year-over-year (YOY). However, they weren’t willing to overlook guidance.
Although management’s 2023 revenue outlook really wasn’t that bad — expecting sales of $5.3 billion, plus or minus $300 million, versus a consensus of $5.52 billion — it was enough to sink AMD stock. Qualcomm’s (NASDAQ:QCOM) lackluster earnings reaction yesterday also didn’t help.
Today, though, AMD stock is proving what many already know: AI is a major catalyst among investors right now. Be it for Microsoft, Nvidia or AMD stock.
Two of these names — NVDA and MSFT — have been major drivers of the market’s year-to-date (YTD) rally. Still, while I do believe in the long-term potential of this segment, investors should remember there are still short-term obstacles to navigate.
On the date of publication, Bret Kenwell did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.