TLDR
- AMD shares dropped 6% after weak Q2 AI data center results ended three-month 40+ percent rally
- MIT study reveals 95% of companies lose money on AI investments, sparking tech selloff
- Nvidia, Intel, and Arm ramp up competition while AMD faces China revenue risks worth 24% of sales
- Stock breaks key technical support at 20-day moving average for first time since April
- Inflation data threatens Fed rate cuts that fueled AMD’s recent gains
AMD stock crashed back to reality this week. The chip maker’s shares fell over 6% after quarterly results failed to live up to the hype around artificial intelligence.
The semiconductor giant’s AI data center business disappointed investors. Revenue barely topped estimates, but that wasn’t enough for a stock that had surged 42% in three months.
AMD opened higher the next day, touching $186.65. But the bounce didn’t stick, and shares have been sliding since.
The stock broke below its 20-day moving average this week for the first time since April. Shares tested the $160 support level as the rally officially ended.
MIT Study Deflates AI Dreams
New research from MIT dealt a crushing blow to AI stocks. The study found 95% of businesses haven’t made money from their generative AI investments.
This data triggered widespread selling across tech stocks. AMD opened down 5% before recovering slightly during Tuesday’s session.
The research raises serious questions about AI’s profit potential. Investors are starting to wonder if they’ve been chasing a bubble.
Competition Gets Fierce
AMD faces tougher competition on all fronts. Nvidia has accelerated chip development to defend its Chinese market share while advancing new processor lines.
Arm Holdings moved to in-house manufacturing to strengthen its supply chain position. Intel landed a $2 billion investment and may get a 10% government stake.
These moves show how competitive the chip space has become. AMD can no longer count on easy wins.
China Tensions Add Risk
Geopolitical problems are mounting for AMD. China represents 24% of the company’s total revenue, making trade tensions a major threat.
U.S. export restrictions on advanced chips create additional hurdles. Supply chain changes aimed at reducing China dependence could raise costs and slow growth.
Rate Cut Hopes Fade
Inflation concerns are also hitting AMD shares. July’s Producer Price Index came in much hotter than expected.
Target and Home Depot warned that tariffs are driving up consumer costs. Higher inflation could prevent the Federal Reserve from cutting rates as much as investors want.
Rate cut expectations have been crucial to AMD’s rally. Without them, the stock loses a key support pillar.
Goldman Sachs still sees potential in AMD’s data center GPU business. Analyst James Schneider projects revenue could hit $10-11 billion by 2026.
But he warned that high expectations and scaling challenges could limit near-term gains. Execution risks remain large for the chip maker.
AMD closed Tuesday down 2.2% as investors reassessed the company’s AI prospects. The stock faces a difficult path back to its recent highs without clearer evidence that AI investments actually pay off.
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