AMD Q2 Earnings Preview: Can the Rally Continue?
AMD Q2 Earnings Preview: Can the Rally Continue?
Semiconductor stocks have performed well amid steady investment plans toward AI and the data centers that power large language models
- Advanced Micro Devices second quarter results are scheduled for tomorrow.
- The company has outperformed the market, potentially making it vulnerable if earnings disappoint.
- Strong technical support and a recent bullish signal from an SMA crossover leave prices in a strong technical position.
Advanced Micro Devices (AMD) is set to report second quarter earnings tomorrow, after the market close. The stock was up 3% on toay ahead of its earnings report as the broader market rallied following Friday’s sell-off.
AMD has advanced over 100% since its April lows when the market bottomed following Trump’s trade war. That is well above the S&P 500’s performance over the same period.
Semiconductor stocks have performed well amid steady investment plans toward artificial intelligence and the data centers that power large language models (LLMs).
Another positive tailwind for the company comes from a plan by the United States to ease chip restrictions on sales to China. In July, AMD said it would soon resume shipments of its MI308 chips to China, which are geared towards powering artificial intelligence.
Still, trade restrictions could hurt AMD’s bottom line, with the company warning several months ago that it could take a hit of nearly $1 billion over the chip sale restrictions to China. This earnings report should give investors a better picture of just how bad the company was impacted.
AMD has also raised prices for its MI350 graphic processing units (GPUs) to $25,000 from $15,000, which suggests that the company is competing well with Nvidia (NVDA) and that the market for AI chips remains healthy.
What do investors expect?
According to TradingView, investors expect AMD to post earnings per share (EPS) of $0.48 on $7.41 billion in revenue for the second quarter. That would compare to an EPS of $0.69 on $5.83 billion in revenue a year ago. Last quarter, AMD’s EPS came in at $0.96 on revenue of $7.44 billion.
Analysts are mostly bullish on the stock, with 42 strong buy and buy ratings, 15 hold ratings and zero sell or strong sell ratings. The average one-year price target is at 155.53, representing a 12% decline from today’s 176.95 stock price.
Trading AMD earnings
AMD traded with an implied volatility rank of 31.0 as of today, meaning volatility is below average compared to the past year of trading. The options market expects a +/- 13.32 move after the results, or 7.5% of the current stock price. That is within the average 5% to 10% post earnings move range for S&P 500 companies.
The nine-day exponential moving average (EMA) has supported AMD since early July, with intraday moves below the EMA being quickly bought up. In mid-July, the 50-day simple moving average (SMA) crossed above the 200-day SMA, generating a bullish technical signal known as a golden cross.
The main concern comes from AMD’s outperformance against the market in recent months, which could leave it vulnerable to a sell-off if earnings disappoint. Alternatively, a positive report could keep prices on their prevailing upward path, which would bring the July swing high from 2024 into focus at 187.28.
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Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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