Depending on when the inquiry is asked and to whom, Advanced Micro Devices Inc (NASDAQ:AMD) is either a critical player in artificial intelligence — and thus deserves a strong valuation premium — or is an overplayed enterprise that has long overstayed its welcome. Both sides offer compelling arguments, which makes deciphering the forward trajectory of AMD stock one of the most contentious practices on Wall Street.
For the upwardly ambitious, investors have plenty of reason to keep the faith in the semiconductor giant. For one thing, the technical performance is quite robust. Since the beginning of this year, AMD stock has gained almost 71%. This statistic is considerably greater than the Nasdaq Composite, which is no slouch at over 19% up during the same frame. Further, the benchmark S&P 500 is up only 15%.
Recently, Wedbush senior analyst Dan Ives published his "Top 10" tech stocks he believes are best positioned to lead "the AI revolution." Not surprisingly, the expert's top three included the usual suspects of Microsoft Corp. (NASDAQ:MSFT), Palantir Technologies Inc. (NASDAQ:PLTR) and Nvidia Corp. (NASDAQ:NVDA). But landing in a very respectable fourth place was Advanced Micro.
Specifically, Ives stated that the chipmaker is all "set to gain market share in AI Arms Race," while adding that it currently trades at a "compelling valuation." Furthermore, the analyst expressed optimism for the company's $100 billion deal with software specialist OpenAI, the maker of the ChatGPT chatbot.
Despite the strong endorsement, it's unavoidable that AMD stock has been incredibly volatile in recent sessions. On Nov. 25, the security fell more than 4%. In the past five sessions, it's down over 10%. Even uglier, in the trailing month, AMD suffered an erosion of almost 21%.
Adding to the concerns, Cathie Wood-led Ark Invest made several significant trades that would likely raise eyebrows among tech investors. Conspicuously, the investment firm sold a total of 106,651 shares of AMD stock across its various funds, for a total value of approximately $21.98 million.
Amid the carnage, however, experts such as Google DeepMind researcher Amit Yazdan stated that investors engaged in the sell-off were essentially "clueless" regarding AI-related hardware demand. Invariably, about the only consensus is that the debate is likely to fester, not fade away.
The Direxion ETFs: With so much at stake, Advanced Micro presents a kinetic canvas for traders on both sides of the fence. Subsequently, financial services provider brought to the table a relevant solution: countervailing exchange-traded funds that allow investors to easily speculate on AMD stock.
Getting down to the details, the Direxion Daily AMD Bull 2X Shares (NASDAQ:AMUU) tracks 200% of the daily performance of the namesake equity. On the other end, the Direxion Daily AMD Bear 1X Shares (NASDAQ:AMDD) tracks 100% of the inverse performance.
Primarily, the main purpose behind Direxion ETFs is to offer an alternative mechanism for advanced speculation. Ordinarily, those interested in leveraged or inverse positions must resort to the options market, which may feature unique complexities. In contrast, Direxion funds are debit-based transactions where the most money that can be lost is whatever is put in.
Still, prospective participants must be aware of the very real potential of losing capital. For one thing, leveraged and inverse funds tend to be more volatile and unpredictable compared to standard funds tracking benchmark indices like the Nasdaq Composite. Second, Direxion ETFs are designed for exposure lasting no longer than one trading session. Holding beyond this recommended period may expose traders to positional decay due to the daily compounding effect.
The AMUU ETF: Since the start of this year, the AMUU ETF has gained nearly 130%. Over the past six months, it's up almost 155%.
- Although the headline stats are robust, AMUU's price action recently slipped below its 20-day exponential moving average and the 50 DMA.
- What's particularly worrisome is that the latest trade has pushed the technical candlestick in an orphaned position. Ideally, sentiment needs to improve quickly before further damage occurs.
The AMDD ETF: From the January opener, the AMDD ETF has been ugly, losing nearly 60%. That said, in the past month, the bear fund is up over 22%.
- Recently, AMDD's price action popped above the 20-da EMA and is currently attempting to rise above the 50 DMA.
- Accumulative volume in recent sessions has picked up noticeably, possibly indicating a broader sentiment shift.
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