As AMD Takes a Hit, Should Investors Ditch the Stock?

Advanced Micro Devices AMD may have disappointed investors on Wednesday, but the stock certainly hasn’t been a disappointment to shareholders.

On May 7 we set our buy price for the AI chipmaker at $105. The setup was a reaction to Wall Street’s unenthusiastic response to a May 6 earnings report that we considered exceptional.

One week later, when the setup to enter long at $105 was triggered, we set our target at $159. Advanced Micro hit that target and kept rolling higher, touching $180 just a week ago.

Earnings Were Just OK

Advanced Micro Devices was thrown for a loss on Wednesday. The company reported solid revenues, but earnings were in line with estimates. That was enough to send the stock reeling for a 6.4% loss.

On Wednesday, the stock closed at $163. That’s a decline of about 11% from this year's high of $182.50, set on July 31.

When viewed from our $105 buy point in May, however, that’s a gain of 55% in just three months. 

The Chart Tells the Story

Is Advanced Micro Devices still a good stock to hold, or should investors take their profits and run? Let’s go to the charts to find out.

Shares of Advanced Micro are still in a bullish trend. The stock remains above a trend line that dates back to the April lows (green dotted line), as well as its 50-day moving average (blue). The stock’s 200-day moving average (red) turned higher late last month, for the first time this year. 

While volume on Wednesday’s selloff was high, it was less than 50% higher than the previous day’s volume (shaded yellow). This tells us that while institutional traders were sellers, they weren’t unloading Advanced Micro shares at an alarming clip. 

If I weren’t already long AMD, I’d be looking to buy shares near the confluence of the 50-day moving average and the bullish trendline, in the mid-140s. Since I’m already long, I won’t consider selling unless both the trend line and the 50-day moving average are broken.

Export Restrictions Weigh on AMD

One problem facing Advanced Micro is export restrictions, which have stifled sales of its MI308 chips to China. It’s unknown when those restrictions will be lifted, so AMD investors will be dealing with that uncertainty for the foreseeable future.

Then again, in the world of investing, uncertainty is par for the course. The AI revolution is still in its early stages, so I’m not going to allow uncertainty to take me out of a stock that has already yielded significant gains. I'm staying long AMD. 

At the time of publication, Ponsi was long AMD.