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Asset Watch

Is a big move coming for AMD?

Tuesday June 11, 2024

While NVIDIA continues to leave its competitors in the dust, AMD could offer relative value as it enhances its AI offerings over the next several months. On 7 Jun. Melius Research analyst Ben Reitzes wrote, “…we think Meta’s AI orders are set to kick in further,” as the Facebook parent ramps up its AI investments in the back half of 2024.
“Remember, AMD doesn’t need to be NVIDIA; it’s only 9% of its market cap,” Reitzes wrote. “We think AMD deserves more attention, having underperformed NVIDIA by 131 points [year to date], but with [earnings-per-share] power that could top $8 within a few years.”
So, with the fundamental bulls betting on a big move to the upside, do sentiment and technicals support this conclusion?

For starters, June is the second-worst seasonal month of the year for the S&P 500, so it may be wise to remain vigilant for the next few weeks. Outside of that, AMD is sandwiched between its 20-week moving average near $172 (the yellow line) and price support from its 2021 highs near $164. As a result, a major move could be on the horizon as the bulls and bears battle for short-term supremacy.
If the latter wins out and a breakdown occurs, AMD could find support at its 50-week MA near $140 (the blue line). The stock bounced off the level in May and October 2023 before soaring alongside the AI optimism.
If the bulls prevail, watch for a breakout above the 20-week MA. In October 2023, AMD corrected after hitting the 20-week MA, found support at the 50-week MA, and then broke out. Therefore, while the 20-week MA has been resistance for the last few weeks, the next breakout may be a buying opportunity.
So, will June seasonality cause an AMD correction, or is a rally back toward the 2024 highs the most likely outcome?


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