Amid Chip and Memory Bounce, This One Name Stands Out
Chip and memory stocks soared on Tuesday, as the Philadelphia Semiconductor Index (SOX) gained over 5%.
While it was a good day for the sector, July has been a rough month for the semiconductors. Despite Tuesday’s gain, the SOX has lost about 13% since the start of the month.
Tuesday was the seventh consecutive session that saw the Philadelphia Semiconductor index close below its 50-day moving average (blue). In addition, the index has formed a bearish pattern known as a rounded top (shaded yellow). Because of this, it wouldn’t be surprising if chip stocks encounter some additional downside.
Question of the Day
Is the selloff in chip and memory stocks a buying opportunity? If so, which name would you buy right now?
Just to be clear, we’re already up to our ears in chip and memory stocks. We currently count Nvidia ($NVDA), Broadcom ($AVGO), and Micron ($MU) among our holdings. All of those names are showing substantial gains, and all have been partially reduced due to growth, so we’re not looking to add at this time.
Advanced Micro Devices Stands Alone
However, if I wasn’t currently holding those stocks, there is one name that stands out right now: Advanced Micro Devices ($AMD).
While the Philadelphia Semiconductor Index struggles to climb above its 50-day moving average (blue), Advanced Micro only closed beneath that key indicator for one day. While the SOX trades 19% below its all-time high, AMD is only 7% away from a new high.
While the SOX has formed a bearish topping pattern, Advanced Micro has merely spent the past two months consolidating its gains (shaded yellow). AMD has lost less than 2% of its value over the past month, and sits on a gain of 142% year-to-date.
Deals with Microsoft and OpenAI
Earlier this week, Advanced Micro announced a deal with Microsoft ($MSFT) to deploy its Helios AI platform across Microsoft’s Azure cloud infrastructure. Meta Platforms ($META) and OpenAI also use AMD’s Helios platform.
Several analysts recently updated their price targets for AMD. UBS now sees the stock reaching $700, while analysts at Rosenblatt raised their price target to $655. AMD is scheduled to report earnings after the August 4 close.
Bottom Line
Why does Advanced Micro Devices stand out among its peers right now?
Earlier this month, institutional investors decided to lighten up on some names in this sector. This is why so many stocks in this sector have been punished.
Simply put, AMD was punished less than the rest. Institutions decided to hang on to AMD, and that’s why the stock has suffered little technical damage over the past three weeks.
At the time of publication, Ponsi was long Long AMD, NVDA, AVGO, and MU.
