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The fall came amid a broader sell-off in the tech sector that saw megacap stocks fall 1.5% to 5% and the Philadelphia SE Semiconductor Index drop 3.5%. Wall Street fell on Wednesday after rating agency Fitch downgraded the U.S. government’s credit rating.
AMD’s stock had risen 4% in extended trading on Tuesday after the company said customer interest was “very high” for its upcoming MI300 AI chip, which will ramp up in the fourth quarter.
AI has been a key theme in the chip sector so far this year, driving shares of chip companies and helping Nvidia (NASDAQ:NVDA) become the first and only semiconductor firm to be valued at more than a trillion dollars.
Investors hope AMD will emerge with a challenger chip to Nvidia’s most powerful AI semiconductors and help in fulfilling strong demand for chips that can power applications like chatbot ChatGPT.
AMD’s shares have risen about 82% so far this year, compared with Nvidia’s stock that has more than tripled in value. The Philadelphia SE Semiconductor Index has gained about 52%.
AMD’s forward price-to-earnings multiple, a common benchmark for valuing stocks, stands at 31.40.
“Unless numbers get really material, soon, we fear estimates remain too high and the stock (AMD) looks a little stretched to us,” Bernstein analysts wrote in a note.
Summit Insights Group analyst Kinngai Chan said investors were giving AMD a pass hoping for a bigger AI payday.
The company forecast third-quarter revenue of about $5.7 billion, plus or minus $300 million. Analysts polled by Refinitiv on average expect revenue of $5.82 billion.
“The Bulls want AMD to be the next concept stock… the Bears say show me the results and make me believe the AI hype.”
