The chip stock usually underperforms in September
Investors have rallied behind chip stocks amid advancements in artificial intelligence (AI). Sector leader Nvidia (NVDA) is up almost 150% since the start of 2024, and the VanEck Semiconductor ETF (SMH) sports a 39.3% year-to-date lead. Advanced Micro Devices Inc (NASDAQ:AMD) stock is brushing off NVDA's post-earnings drop, up 1.2% at $148.11 at last glance, but multiple bear signals suggest trouble lies ahead.
Schaeffer's Senior Quantitative Analyst Rocky White just released his list of worst S&P 500 Index (SPX) stocks for September. AMD ranks as the fifth worst SPX component to own next month and is the only semiconductor name on the list, averaging a 6.2% loss for September and ending it lower 90% of the time.
A separate study from White also notes that Advanced Micro Devices stock just came within one standard deviation of its 100-day trendline. According to this data, five similar signals occurred over the past three years. One month after 60% of these signals, the security had negative returns, averaging a 7.5% drop.
With these two bear signals coinciding, AMD looks poised to breech its fractional 0.5% year-to-date lead and pare its more respectable 38.9% year-over-year gain. Shares are a far cry from their March 8 record high of $227.30 and at risk of coming back near their Aug. 5 year-to-date low of $121.82.
Options traders are also bullish on AMD. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day call/put volume ratio of 1.97 ranks higher than 92% of readings from the past year. Keep an eye on a shift in optimism that could add more headwinds.