It’s perfectly understandable if you’re champing at the bit to “buy the dip” with Advanced Micro Devices (NASDAQ:AMD). With the company just weeks away from its next quarterly earnings release, well-received results and guidance could lead to a big rebound for AMD stock.
However, speculating on a well-received quarterly earnings release for the AI chip designer is a gamble. In past coverage, we have provided a cautiously-optimistic take on shares. Today, however, it may be more accurate to say that “watch and wait” best describes our current view.
Why AMD Stock May Not Have a Post-Earnings Rally
Advanced Micro Devices is scheduled to report its latest quarterly earnings post-market on July 30. Again, you may hope that recent weakness is just the prelude to a post-earnings extended rally, but it’s far from a lock that this bullish scenario pans out.
For one, the recent AMD stock pullback has as much to do with broad market bearishness for AI chip stocks as it does for this AI chip contender in particular.
As Barron’s commentator Jacob Sonenshine recently discussed, investors have soured on AI chip stocks for multiple reasons, including those related to heightening tensions between the U.S. and China.
Sonenshine believes that these concerns are overdone, but for now they could continue to weigh on the minds of investors.
Hence, the potential for the market to focus more on the negatives, and less on the positives, with AMD’s latest quarterly results and guidance.
Don’t get us wrong. We don’t think that Advanced Micro Devices shares are necessarily going to tank at the end of this month. Rather, much as what happened after AMD’s latest earnings release in May, shares could experience a further moderate-sized drift to lower prices.
Late Summer Weakness Could Prove Favorable
If the upcoming earnings release fails to put AMD stock back on an upward trajectory, the July slide could persist into August. From here, shares could fall below $150, perhaps toward price levels of between $125 and $140 per share.
Although these represent frustrating prospects for existing investors, there may be a silver lining, especially if you’ve yet to enter a position.
Right now, AMD trades at a similar valuation to that of its largest peer in the AI chips space. Following an additional decline, however, shares will again be relatively cheap.
Buying in at such levels could mitigate downside risk, in event of an unforeseen growth slowdown. At the same time, you will still have exposure to what remains a likely rebound for Advanced Micro Devices, either later this year or in 2025.
It’s important to remember that AMD has only just started to capitalize on the GenAI growth trend. AI chip sales are only expected to come in at $4 billion this year. Next year, however, at which time the company will be in full swing with its AI-PC chip rollout, expect considerably higher sales volumes for both AI accelerator and AI-PC chips from AMD.
The Verdict: Keep an Eye on Advanced Micro Devices
An AMD rebound may not happen after the upcoming earnings release, yet it may be a different story with the next few quarterly earnings releases. Once the sale of AI-PC chips starts affecting the top and bottom line, a new wave of bullishness may emerge for shares.
The coming quarters could also bring the first round of benefits from AMD’s recently announced acquisition of SiloAI. Purchasing this AI lab could in time prove to be a move that helps this company lessen many of the competitive advantages that its first-mover rival currently benefits from.
If you currently own Advanced Micro Devices shares, there’s no need to sell ahead of earnings. Letting existing positions ride makes sense. However, while you’re free to buy in now ahead of the earnings release, waiting instead for possible further weakness with AMD stock may be the better move.
AMD stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.