Here’s why the AMD stock price crashed after earnings

AMD stock price crashed by over 6% in the extended hours after the blue-chip semiconductor company published mixed second-quarter results. It dropped to $163.25, down by nearly 10% from its highest point this month.

AMD earnings takeaway

AMD, the giant semiconductor company, had a strong performance in the second quarter as analysts expected. Its revenue rose by 32% YoY to $7.6 billion. This revenue was up by 3% from the same quarter last year.

AMD’s profitability jumped by 229% even as the gross margin deteriorated from 49% in Q2’24 to 40% last quarter. 

The closely watched data center business continued growing, albeit at a slower pace than predicted. Its sales rose by 14% to $3.2 billion, which the company blamed to Donald Trump’s ban of shipments to China. 

The client segment’s revenue rose by 67% YoY to $2.5 billion, continuing a recovery process that started a few months ago. Most importantly, the gaming segment that has been a major drag to AMD’s earnings rose by 73% to $1.1 billion.

The main laggard was the embedded segment whose revenue dropped by 4% to $824 million during the quarter. In a statement, Lisa Su, the company’s CEO, who is also NVIDIA’s Jensen Huang’s cousin, said:

“We are seeing robust demand across our computing and AI product portfolio and are well positioned to deliver significant growth in the second half of the year, driven by the ramp of our AMD Instinct MI350 series accelerators and ongoing EPYC and Ryzen processor share gains.”

AMD also offered guidance that was better than expected because of Trump’s decision to allow shipments of chip stocks to China. It now expects that its Q3 revenue will be $8.7 billion, representing a 28% annual growth.

It is likely that the company’s growth will be better than these estimates as the guidance did not include sales of the Instinct MI308, the special chip it designed for the Chinese market as the US government is reviewing it. 

AMD share price fall is an overreaction

There are signs that the AMD stock crash after its earnings was an overreaction, as the company did well and issued a strong guidance that beat analysts’ estimates. 

Before the earnings, the average revenue estimate among analysts was for its revenue to be $8.4 billion. AMD’s guidance, excluding the Chinese shipments, was about $8.7 billion, and the company tends to be highly conservative when issuing its guidance

The other main catalyst for the AMD stock price is that the AI bubble is yet to burst, as demand is still strong. For example, the latest reporting is that OpenAI is seeking to raise capital at a $500 billion valuation, a move that will make it one of the biggest US companies. 

Palantir released strong earnings on Monday, demonstrating that demand is surging. Top data center hyperscalers like Microsoft and Meta Platforms are also spending heavily on AI, which will boost its growth.

AMD stock price technical analysis

The daily chart shows that the AMD share price has been in a strong bull run in the past few months. It moved from a low of $76.55 in April to a high of $182. 

The surge derailed after earnings, reaching a low of $163.50. This decline was because it did not release its guidance for Chinese sales. Technically, the decline happened as the strong results were already priced in as its stock was up by 136% from its lowest point in April. 

Therefore, the stock will likely resume the uptrend in the coming weeks. If this happens, the initial level to watch will be at $182. A move above that level will point to more gains, possibly to $200.

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