Advanced Micro Devices (AMD) Stock Falls Ahead of Q2 Earnings

A risk-off move in equity markets over the past two weeks hit semiconductor stocks hard

• Advanced Micro Devices (AMD) is set to report Q2 earnings Tuesday, July 30.

• Analysts expect AMD to report $0.68 earnings per share on $5.7 billion revenue.

• AMD volatility is high relative to the past year, with an implied volatility rank (IVR) of 77.6.

• The weak technical structure points to more downside after prices breached the 200-day simple moving averge (SMA).

Advanced Micro Devices (AMD) is scheduled to report second-quarter fiscal results on Tuesday, July 30, after the market close. According to an AMD press release, management will host a conference call at 5 p.m. EDT.

AMD stock is nearly flat on the year as of today, after declining nearly 9% in July. A risk-off move in equity markets over the past two weeks hit semiconductor stocks hard, with the VanEck Semiconductor ETF (SMH) down nearly 11% over the past two weeks.

Despite market headwinds leading up to AMD’s earnings, results from chipmaker Texas Instruments (TXN), which reported earnings yesterday, point to improving demand for semiconductors, as the company provided guidance toward the upper range of estimates. This assuaged some concerns over NXP Semiconductors (NXPI) after the company gave weak guidance amid a struggling automotive sector, but it wasn't enough to stop the bleeding in technology stocks.

Earnings reports from Qualcomm (QCOM), ARM Holdings (ARM) and Intel (INTC) are due in the two days following AMD’s earnings, setting up a make-or-break week for the semiconductor industry. Microsoft (MSFT) results are also due, which will help inform markets of data center demand.

AMD numbers: What do investors expect?

Investors anticipate AMD will report non-GAAP (generally accepted accounting principles) earnings per share (EPS) at $0.68 on $5.7 billion in revenue, according to Yahoo Finance. That would be up from a year ago when AMD reported EPS of $0.58 on $5.4 billion. AMD projected Q2 revenue at $5.7 billion, +/- $300 million, earlier this year.

Estimates strengthened over the past 90 days, with the EPS projection rising from $0.65. Several firms covering AMD maintained their overweight and buy ratings leading up to next week’s report. Since May, only one firm, Morgan Stanley (MS), downgraded its rating.

AMD investors will want to see strong growth from its data center and client segments, which grew 80% and 85% year over year (YoY) in the first quarter. AMD’s Instinct GPUs and its fourth-generation EPYC CPUs drove data center growth last quarter, while the Ryzen 8000 processor led its client segment.

Counterpoint, a technology market research firm, is forecasting strong shipment growth for personal computers (PCs) through the second half of 2024 after the global PC market grew 3% YoY in the first quarter, reversing declining shipments in the previous eight quarters.

The forecasted strength in artificial intelligence (AI) PC demand from Counterpoint provides another tailwind for sales. AMD will release its MI325X accelerator later this year, likely in Q4. The accelerator will succeed the MI300, which drove AMD’s data center growth in Q1 and likely in Q2. CEO Lisa Su stated that the AI chip is 30% faster than Nvidia’s (NVDA) H200.

AMD still lags behind Nvidia in market share for GPUs, but it’s been catching up. AMD’s GPU market share rose to 19% at the end of 2023, up from 12% at the start of the year, according to Jon Peddie Research (JPR). Nevertheless, AMD ceded some market share to Nvidia in Q1, although the longer-term trend remains intact for now.

Trading AMD through earnings

AMD is down about 35% since March when the stock recorded a fresh all-time high of 227.30.

Implied volatility surged as the stock price fell. AMD’s implied volatility rank (IVR) was 77.5 as of July 24.

The Aug. 2 options expiration shows an expected move of +/- 11.7 points, or about 8% of the current stock price.

Technically, the May swing low at 141.16, which is about 3% below the current price, could provide some support. Alternatively, a drop below this level could invite more selling.

AMD made a decisive move below its 200-day simple moving average (SMA) todaty, trading below the key SMA for the first time since November.

That said, the path lower looks like the path of least resistance for AMD, which makes the 141.16 May swing low a level of high significance. If bulls can’t defend this level, it could mean more downside. Earnings could provide a major catalyst for a potential support test.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro. 

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.