The Future of Advanced Micro Devices (AMD) Stock Amidst AI Chipmaker Rally
Advanced Micro Devices (AMD) shares fell for a second straight session on Monday as investors reassessed how much more room chipmakers have to run after a rally fueled by optimism about AI-related business growth. The stock is pointing higher in pre-market trading Tuesday.
Analysts’ Optimism for AMD
Analysts expect AMD to grow earnings annually by around 40% to more than $7 a share by 2026, driven by AI chip sales. This positive outlook has been a key driver behind the recent surge in AMD’s stock price. Despite the recent pullback, many analysts remain bullish on the company’s long-term prospects in the AI chip market.
Market Performance and Trends
After closing at a record high on Thursday, AMD shares fell 1.9% on Friday and dropped another 4.3% on Monday. The stock, which has gained 35% since the start of the year, was up 0.7% at $199.70 in pre-market trading Tuesday at 7:00 a.m. ET.
AMD’s performance has been closely tied to the broader trend in AI chipmakers, with investors closely watching companies like Nvidia for cues on market direction. The recent caution around Nvidia’s future growth potential has also impacted AMD’s stock price, as investors view the two companies as closely related players in the AI space.
Positioning in the AI Chip Market
Despite the recent pause in AMD’s stock rally, the company remains well positioned to capture a growing market share of AI chip sales. In December, Facebook parent Meta and Microsoft announced plans to use AMD’s newest AI chip, signaling a shift towards alternatives to Nvidia’s GPUs in building AI infrastructure.
Analysts expect AMD to continue its strong earnings growth trajectory, with projections of annual growth of around 40% to more than $7 a share by 2026. This outlook reflects the increasing demand for AI chips across various industries and the potential for AMD to capitalize on this trend.
Technical Analysis and Support Levels
Like Nvidia’s stock, AMD’s share price has shown signs of weakness in recent trading sessions. The bearish engulfing pattern on Friday and subsequent decline on Monday have raised concerns among investors. However, there are key support levels that could provide a floor for the stock price.
If further weakness persists, the $176 level is seen as a critical support area for AMD’s stock. This level is supported by an uptrend line from the late October low, the rising 50-day moving average, and the key 38.2% Fibonacci retracement level. A breakdown below this level could signal a deeper pullback towards the 200-day moving average.
Conclusion
Despite the recent pullback in AMD’s stock price, analysts remain optimistic about the company’s long-term prospects in the AI chip market. With strong earnings growth projections and a growing market share in AI chip sales, AMD is well positioned to benefit from the ongoing adoption of AI technology across various industries.
Investors should closely monitor key technical levels, such as the $176 support level, to gauge the stock’s near-term performance. Overall, AMD’s future looks promising amidst the broader rally in AI chipmakers and increasing demand for advanced technology solutions.
The comments, opinions, and analyses expressed in this article are for informational purposes only. Readers should conduct their research and consult with financial advisors before making investment decisions.
