AMD stock price has plunged since 2024, leading to a $245 billion wipeout as the market cap dropped from a high of $379 billion in 2024 to $134 billion today. It has also retreated to its lowest level since May 2023.
Why AMD stock price crashed
AMD share price continued its downtrend this week as the trade war between the United States and China escalated.
On Tuesday, Beijing ordered its airlines to pause deliveries from Boeing, the second-biggest airline manufacturer in the world. In response, the Trump administration asked its chip companies not to sell their less advanced products to China.
NVIDIA has warned that these curbs will lead to a $5.5 hit to its business since the company still makes a lot of money from China. AMD has also warned that the curves will seriously affect its business this year.
These curbs come when there are concerns about the demand from data centers, which may also hurt its operations. There are signs that large companies that went on a spending spree on data centers are starting to scale back their operations.
Microsoft, one of the top investors in data centers, has started to pause its operations in the US and other countries. This trend may continue to other companies like Amazon and Google.
AMD stock price has also plunged because its other segments, like embedded and gaming are not doing well, with their sales trajectory moving in the negative direction.
All these factors have affected most companies in the semiconductor industry. NVIDIA’s stock price has plunged by over 30% from its highest point this year.
Similarly, the top semiconductor ETFs like the VanEck Semiconductor ETF (SMH) and the iShares Semiconductor fund (SOXX) have moved into a bear market after falling by over 20% from their highest levels this year.
AMD’s growth is driven by the data center business
The most recent results showed that AMD’s business is primarily being driven by its data center business. This growth has helped it to grow its market share in the AI GPU industry.
The data center division’s revenue jumped by 69% to $3.8 billion in the fourth quarter, while its operating income stood at $1.157 billion.
Its client segment, which sells chips like Ryzen for use in desktops and notebooks, rose by 58% to $2.3 billion. However, the revenue from the gaming and embedded businesses dropped by 59% and 13%.
AMD believes that its AI business will help to boost its growth over time. Its estimate is that first-quarter revenue will be about $7.1 billion, up by about 30% from a year earlier.
The ongoing AMD stock crash has made it a fairly undervalued company. It has a forward P/E ratio of 34.5, lower than its five-year average of 94. The non-GAAP PE ratio of 19 is also lower than its historical level of 50.
AMD stock price analysis
AMD chart by TradingView
The weekly chart shows that the AMD share price has crashed in the past few months as we predicted here and here. It has crashed below the important support at $133, its highest level in July 2023.
The stock just plunged below the 50-week and 200-week Exponential Moving Averages (EMA). These two averages could cross each other soon, forming a death cross pattern, a popular bearish sign.
AMD shares also dropped below the key support at $93.56, its lowest swing in October 2023. Top oscillators like the Relative Strength Index (RSI) and the MACD have all pointed downwards.
Therefore, there is a risk that the AMD stock price will keep falling as sellers target the key support at $55.25, the lowest swing in October 2022, which is about 37% below the current level.
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