To The Moon

We have seen how $Advanced Micro Devices(AMD)$ suffer more than 5% dip on last Friday (30 Jan), though AMD has a more balanced chip business than Nvidia. AMD stock trades at a premium valuation of 40 times expected 2026 earnings. With rumor concerning potential production hiccups for its upcoming MI450 AI accelerators, will this further shake investors confidence for AMD ahead of its earnings. As AMD prepares to release its Q4 2025 earnings on February 3, 2026, the concern of its "premium" status could not be overlooked. While $NVIDIA(NVDA)$ dominates the headlines, AMD has quietly positioned itself as the "balanced" alternative, though this comes with a high bar for performance. In this article, we would like to look at the breakdown of what to expect and how to look at the trading landscape. The "Premium" Reality Check You mentioned AMD trading at 40x expected 2026 earnings. Current analyst consensus for 2026 EPS is roughly $6.36, placing the forward P/E around 35x to 40x. Why it's a premium: For comparison, Nvidia often trades at a lower forward P/E (currently around 24x–30x for its next fiscal year) because its revenue has already "mooned." The Justification: Investors are paying for acceleration. AMD is coming from a smaller AI base; a $1 billion gain in AI market share moves the needle much more for AMD than for Nvidia. To keep this 40x multiple, AMD must show that its MI350/MI400 series GPUs are gaining traction with hyperscalers like Microsoft and Meta. What to Expect: Q4 2025 Consensus The "Wildcard": Management’s 2026 guidance. If Lisa Su raises the 2026 AI revenue target (previously aimed at $10B+), the stock could shrug off any minor Q4 misses. The Strategy: Is a Bull Put Spread Viable? A Bull Put Spread (selling a higher strike put and buying a lower strike put) is a "neutral to bullish" strategy. It is designed to profit from time decay and volatility crush after earnings. Why it works for AMD post-earnings: High Implied Volatility (IV): Option prices are inflated before Feb 3. Once the news is out, IV typically crashes. As a seller of the spread, you "pocket" that drop in value. Support Levels: If you believe AMD's long-term 2026 story protects it from a massive crash, you can sell a spread below key support (e.g., $210 or $220). The Risk: If AMD provides "soft" guidance, a 40x multiple leaves a lot of room for a "valuation reset." A 10% drop could easily blow through your short put strike. Trading Note: For a post-earnings play, traders often wait for the initial "knee-jerk" reaction. If the stock dips but the guidance remains strong, selling a bull put spread 5–10% below the new price can be a way to capitalize on a recovery. AMD Gamma Flip Point AMD gamma flip point is 236.36 where gamma exposure switches positive to negative (or vice versa). The gamma flip point, and call and put wall, are based on aggregate gamma exposure across all contracts. They are calculated using open interest, on a 1% move, using end-of-day data, updated at approximately 8:30pm ET for the next trading day. AMD put wall is 220.00. AMD call wall is 250.00. Put and Call Wall figures are based on the highest gamma reading across all contracts. Short-Term Opportunity Checklist The "Guidance Gap": Watch for a beat-and-raise. If AMD beats Q4 but only "reiterates" 2026, the stock may sell off due to that high 40x valuation. The OpenAI Factor: Any updates on the partnership with OpenAI (which involves potential equity stakes) could act as a massive catalyst. Technical Support: Look at the 50-day moving average. If AMD stays above it post-earnings, the technical trend remains your friend. In the next section, we will be sharing how we planned for a bull put spread, to calculate specific breakeven points for a Bull Put Spread on AMD, we first need to look at the current market context leading into the February 3, 2026 earnings. As of the market close on Friday, January 30, 2026, AMD shares fell ~6% to close at $236.73. This dip was largely attributed to rumors regarding potential delays in the MI450 AI chips, though some analysts (like Wells Fargo) remain highly bullish with a $345 target. Bull Put Spread Calculation In a Bull Put Spread, we sell a put at a strike price where we expect the stock to stay above, and buy a further out-of-the-money (OTM) put for protection. Given the current price of $236.73 and an implied move of ~8.9% (roughly ) for the earnings week, here is a sample setup: Key Financial Thresholds Using the sample above, here are your specific numbers: Breakeven Point: $216.00 Formula: Short Put Strike ($220) - Net Credit Received ($4.00) Maximum Profit: $400 (The net credit received) Realized if AMD stays above $220 through the February 6 expiration. Maximum Risk: $600 Formula: (Width of Strikes - Net Credit) x 100 → ($10 - $4) x 100 Margin Requirement: Typically the width of the spread ($1,000) minus the credit received ($400), totaling $600. Strategic Considerations for Feb 3 The "Safety Buffer": With a breakeven of $216, you have an 8.7% cushion from the current price. If the implied move is exactly 8.9%, this trade sits right on the edge of the expected volatility. Volatility Crush (IV Crush): The beauty of this play is that even if AMD stays flat or only dips slightly to $225, the value of the options you sold will plummet after the announcement, allowing you to close the trade early for a profit. The Valuation Trap: Because AMD is trading at that 40x premium, a "neutral" guidance could be viewed as a negative by the market. If you are nervous about the $236 price holding, you might consider shifting the strikes lower (e.g., selling the $210 and buying the $200). Summary AMD reports its Q4 2025 earnings on February 3, 2026, after the market close. This release is a critical "put up or shut up" moment for the stock’s current valuation. Earnings Consensus & Key Metrics Revenue: Expected at $9.6 - $9.7 billion (~25-28% YoY growth). Earnings Per Share (EPS): Consensus sits between $1.10 and $1.32. Data Center Strength: This is the primary engine. Analysts are looking for continued ramp-up of the MI350 series GPUs and the 5th Gen EPYC processors. Gross Margin: Expected at ~54.5%. Any expansion toward 55%+ would signal the pricing power needed to justify a premium multiple. The "Premium" Valuation Pressure AMD trades at roughly 40x projected 2026 earnings, which is significantly higher than Nvidia’s forward multiple (often in the 25x–30x range). This creates a "priced for perfection" scenario: Growth Reacceleration: Investors aren't just looking for a beat; they want a raise for 2026 guidance. Management previously projected a 60% CAGR for the Data Center through 2030; this quarter must show they are on track. Diversification vs. Focus: Unlike Nvidia’s 90% concentration in Data Center, AMD is split ~50/50. While this provides a safety net if AI cools, it can be a drag during an AI boom if the "Client" (PC) or "Gaming" (Consoles) segments underperform. What to Watch for Post-Earnings The market’s reaction will likely hinge on 2026 AI Revenue Guidance. If Lisa Su raises the AI revenue outlook (e.g., toward $15B for 2026), the stock could easily overcome its high P/E. Conversely, if guidance is merely "in-line," the stock may see a valuation reset, especially since it has historically pulled back after earnings in recent cycles. Trading Opportunity Given the high Implied Volatility (IV), a Bull Put Spread (e.g., selling the $220 put and buying the $210) remains a popular play to capitalize on "IV Crush." It allows you to profit if AMD stays flat or rises, while providing a defined-risk buffer if the high valuation leads to a temporary dip. Appreciate if you could share your thoughts in the comment section whether you think a potential bull put spread is possible for AMD for its upcoming earnings. @TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts. Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.