Since the beginning of October, shares of Advanced Micro Devices (NASDAQ: AMD) are down roughly -50%. But this week, the stock is finally starting to show signs of life again and is up about 14% as I write this.
Several factors have weighed on the stock in the last two months. The trade war, investors’ anxiety about the entire tech sector, and the tanking market for cryptocurrency mining have all put pressure on AMD.
But, while it hasn’t felt like it lately, AMD is still one of the best performing stocks of the year and is up 107% year-to-date. And now, after a difficult couple of months, investors are starting to indicate that they are willing to take a gamble on the stock again.
“Lots of eyes are on AMD right now, and for good reason. This $20 billion chipmaker has been one of the best performers in the S&P 500 in recent years, and it’s been a bellwether for investors’ confidence in the tech sector,” TheStreet’s Jonas Elmerraji said.
And there’s reason to be excited about the stock. AMD’s CEO Lisa Su has recently said that the company is aiming to grow its server CPU segment by double digits over the next four to six quarters, and to add meaningful revenue from its innovative CPUs in 2019.
AMD is also partnering with big names like Amazon (NASDAQ: AMZN) on custom CPUs. “I think it’s part of doing business in the cloud… optimizing for these key applications,” Su said.
The chipmaker expects revenue to grow by about 8% year-over-year, and anticipates profit margins will improve in Q4 – such results would likely bring some reprieve from the recent sell-off.
The stock’s recent correction has shaved enough off the company’s valuation that it now looks more attractive. And according to Elmerraji, “Big rallies beget big corrections. That’s a normal part of the market’s lifecycle. And right now, it’s looking a little premature to call AMD’s uptrend dead.”
What’s more, in looking at the chart, this week the stock appears to have broken out of a falling wedge pattern, at the bottom of which the stock dipped into oversold territory. The recent low also fell between the 61.8% and 78.6% retracements of the stock’s last run-up, which marks a very deep correction.
If a rebound is in the works, watch for resistance at the $22 level. If the stock breaks above that, the stock is likely to run higher.