To The Moon

$Advanced Micro Devices(AMD)$ stock gained 7% to $113.85 on Monday. News that tariffs on chips coming into the U.S. could be off the table, at least in the short term, was helping to provide a boost to shares.

While Trump's whirlwind tariff offensive since his January inauguration has been marked by threats, reversals and delays, sometimes within hours of imposition deadlines. Let’s dive into the potential sscenarios and related options strategies with AMD stock.

1. Moderately Bullish

Tariff Optimism Boosts AMD Stock

The market reaction indicated that investors took that as a sign the economic impact of the tariffs, particularly on inflation and growth, might not be as bad as they initially feared. That's a bit of a relief, which likely gave businesses and analysts some space to rethink their outlooks. Earlier, the administration had hinted at much broader tariffs that could have hit any country placing duties on U.S. imports, so this shift was likely a welcome surprise for the market.

U.S. President Donald Trump said on Monday automobile tariffs are coming soon even as he indicated that not all of his threatened levies would be imposed on April 2 and some countries may get breaks, a move Wall Street took as a sign of flexibility on a matter that has roiled markets for weeks.

Sector-specific tariffs - including on chips - are now unlikely to be announced on April 2, the day the White House is planning to unveil reciprocal tariff actions, The Wall Street Journal reported on Sunday, citing an administration official.

Meanwhile, there could be further good news in evidence that Washington is prioritizing pressure on fellow governments to deal with concerns that advanced chips are reaching China despite U.S. sanctions, rather than expanding export restrictions.

Strong AI growth

Given the overall huge growth of the AI infrastructure market, AMD is still seeing solid gains with its GPUs. It's been having growth in inference, and overall remains an alternative to a capacity constrained Nvidia. However, at this point, taking a chunk of market share away from Nvidia seems unlikely.

Where the company has been shining is with its central processing units (CPUs). While GPUs provide much of the computing muscle, CPUs provide the "brains" - processing information to ensure various PC hardware works optimally in tandem to achieve its functions. The company has been taking market share in the CPU data center space, reporting last quarter that its share is now well above 50% among hyperscalers (companies that own massive data centers).

Overall, AMD saw its data center revenue soar 69% year over year to $3.9 billion last quarter. For the entire year, this category of revenue surged 94% to $12.6 billion.

The company has also been taking share in the personal computer (PC) space with its CPUs. Last quarter, it said it had over 70% market share on several online platforms, including Amazon, Newegg, and MindFactory.

Option Strategy: Bull Call Spread

Structure:

• Buy April 25, 2025 $110 Call

• Sell April 25, 2025 $120 Call

  $AMD Vertical 250425 110.0C/120.0C$

  Net Debit: $4.76×100

• Max Profit: $535

• Breakeven: $114.65

• Max Loss: -$465

  Source: Tiger Trade App

Rationale:

• Targets a breakout above resistance ($114.83) toward $115+.

• High open interest at $110/$115 strikes ensures liquidity.

2. Moderately Bearish

What The Market Is Telling Us

AMD’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, Monday’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 5 months ago when the stock dropped 9.6% on the news that the company reported weak third-quarter earnings results. Its revenue guidance for next quarter missed analysts' expectations. Revenue beat analysts' expectations by a narrow margin during the quarter, while EBITDA beat more convincingly. The outlook weighed on shares as expectations were likely high heading into the announcement amid the ongoing AI rave.

AMD is down 5.7% since the beginning of the year, and at $113.80 per share, it is trading 38.1% below its 52-week high of $183.96 from July 2024. Investors who bought $1,000 worth of AMD’s shares 5 years ago would now be looking at an investment worth $2,462.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business.

Tariffs Is Still an Uncertainty

A White House official declined to say exactly when sector-specific tariffs on autos, pharmaceuticals or semiconductor chips would come into effect, noting that was still "TBD (to be determined) and at the president's discretion."

The official cautioned against expecting a tariff reprieve, adding, "The president is determined to implement reciprocal tariffs that are very strong. People should expect that."

Trump's whirlwind tariff offensive since his January inauguration has been marked by threats, reversals and delays, sometimes within hours of imposition deadlines, as his trade team formulates policy on the fly.

So far, he has imposed new 20% duties on Chinese imports, fully restored 25% duties on global steel and aluminum imports and slapped 25% tariffs on imports from Canada and Mexico that do not comply with a North American trade agreement over the U.S. fentanyl overdose crisis.

Option Strategy: Bear Put Spread

Structure:

• Buy April 25, 2025 $110 Put

• Sell April 25, 2025 $100 Put

  $AMD Vertical 250425 100.0P/110.0P$

  Net Debit: $2.13×100

• Max Profit: $774.5

• Breakeven: $107.74

• Max Loss: -$225.5

  

3. Income Generation: Covered Call

Structure:

• Hold 100 AMD shares ($113.85/share).

• Sell April 25, 2025 $120 Call

  $AMD 20250425 120.0 CALL$

• Max Profit: $2.78×100

Rationale:

• Generates income while holding shares. Ideal if AMD stabilizes near $114 resistance.