AMD Stock Downgraded on Crypto-Mining Competition Concerns

The shares hit their lowest level since Jan. 2 earlier

Mar 26, 2018 at 10:38 AM
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Chip stocks sold off late last week on concerns over a possible trade war with China, and after Citigroup downgraded Micron (MU) on concerns over falling NAND prices. The sector is on the mend today, though, with Beijing reportedly willing to ramp up its purchase of U.S. semiconductors -- sending the VanEck Vectors Semiconductor ETF (SMH) up 2.4% today. However, not all chip stocks are capitalizing on the tailwinds, with Advanced Micro Devices, Inc. (NASDAQ:AMD) trading lower after receiving a bearish brokerage note.

Specifically, Susquehanna downgraded AMD stock to "negative" from "neutral," and slashed its price target on AMD stock to $7.50 from $13.00. The analyst in coverage said China's Bitmain has developed an application-specific integrated circuit (ASIC) to mine ethereum, joining at least three other companies developing similar technology that's more effective than PC graphics cards -- which could negatively impact around 20% of AMD's revenue, per Susquehanna.

A strong start to 2018 sent AMD shares to a year-to-date (YTD) high of $13.85 on Jan. 31, but they have since struggled. The stock has shed 12.9% in March alone, and is currently pacing for its worst monthly performance since October. What's more, the security tagged $10.42 earlier -- its lowest mark since Jan. 2 -- and was last seen down 0.9% at $10.54, sitting just 2.5% above its YTD breakeven mark.

Against this backdrop, sentiment toward AMD is skewed toward the skeptical side -- though it remains below the extremes seen recently. In the options pits, nearly 1.7 million puts are currently in open interest -- in the 94th annual percentile, after topping out at a record high of 2.4 million contracts back on March 14.

Plus, 159.55 million AMD shares are sold short, representing a lofty 19.3% of the stock's available float. However, this is still down almost 10% from the early December peak of 177.02 million shares.

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