AMD's stock has been 'in absolute freefall' - but its earnings could spark a chip-sector rebound

MW AMD's stock has been 'in absolute freefall' - but its earnings could spark a chip-sector rebound

By Emily Bary

AMD has the 'biggest chance' to reenergize the chip sector with its earnings, according to an analyst - but it also has the potential to make things worse

The chip sector is in correction mode, with the PHLX Semiconductor Index SOX off about 12% from its early March highs. But can earnings results from Advanced Micro Devices Inc. later this month help improve the vibe?

Investors have been cautious on AMD shares $(AMD)$ lately, sending them down 26% from their March peak - in part due to concerns about Nvidia Corp.'s $(NVDA)$ decision to price its new Blackwell chip lineup potentially lower than many analysts were expecting, in bid to spur adoption.

Read: Nvidia's stock has had a killer run. Why it's still Morgan Stanley's top AI-chip pick.

But AMD has the potential to change sector sentiment quickly when it reports earnings on April 30, according to Mizuho desk-based analyst Jordan Klein - perhaps more so than any other semiconductor company. That said, he noted that AMD's results could also put more pressure on the sector.

AMD's stock chart is "in absolute freefall," and Klein thinks few investors are "willing to step up and buy on fears [they would be] catching a falling knife" ahead of earnings. There's concern that the company could give mixed commentary on its MI300 artificial-intelligence product or fail to raise its outlook for MI300 revenue, which has called for at least $3.5 billion in sales this year.

Read: AMD's stock can surge 40%, this new bull says - even as Nvidia still dominates

"What they say about outlook for MI300 beyond [the second quarter] is critical to support [the] stock and bring any potential buyers back," Klein wrote. And AMD has the potential to drive sector sentiment in a meaningful way - for better or for worse.

Semiconductor stocks broadly could "react a lot to AMD results and comments, and that has biggest chance to rebound [the] sector, or drive it lower quickly," according to Klein, who said he's still "an AMD bull," even as he's less focused on what the company says on MI300 over a one- to two-quarter span.

TD Cowen analyst Matthew Ramsay suggested investors seem to be following the crowd when it comes to AMD. "The herd mentality of near-term sentiment never ceases to amaze, though sentiment (up or down) has changed a lot more than fundamentals for AMD this quarter," he wrote.

In his view, "supervolatile near-term sentiment on MI300 expectations in our view are overblown as our checks indicate no change to its ability to serve as a strong alternative to Nvidia, with near-term concerns on a couple minor [high-bandwidth memory] bumps likely to be resolved sooner than expected."

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-Emily Bary

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April 18, 2024 12:56 ET (16:56 GMT)

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