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Why Did AMD Stock Fall 25% in the First 20 Days of October?

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AMD stock reacts to the market sell-off

This year has been slow for semiconductor stocks due to growing trade tensions between the United States and China. The stock market has witnessed three sell-offs in 2018 so far: one on February 8, one on March 23, and one on October 11, Advanced Micro Devices (AMD) and its peers Intel (INTC) and NVIDIA (NVDA) were not much affected by the first two sell-offs, as they enjoyed strong demand momentum in the CPU (central processing unit) and GPU (graphics processing unit) spaces.

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However, the three stocks reacted to the October sell-off as the increase in the interest rate by the US Federal Reserve made overvalued stocks less attractive. AMD stock, in particular, has been very volatile as several analysts have questioned the company’s ability to compete with cash-rich Intel.

Volatility

AMD is a highly volatile stock with a beta of 4.06, far above NVIDIA’s and Intel’s betas of 2.05 and 1.08, respectively. Beta is a measure of volatility where a figure of greater than 1 indicates that a stock is more volatile than the market.

AMD’s stock price movement in October

In the first 20 days of October, AMD stock fell 24.7%, four times the S&P 500 Index’s (SPY) fall of 5.3% and three times the VanEck Vectors Semiconductor ETF’s (SMH) fall of 8.2%.

In October, AMD witnessed three major falls. The first fall of 7.6% came on October 1 after CNBC noted that Baird analyst Tristan Gerra had downgraded the stock. The second fall of 8.2% came on October 10 when the stock market witnessed a sell-off. The third fall of 11.1% came on October 19 when a Barron’s article reported that New Street Research analyst Pierre Ferragu had set his price target for AMD at $18, 33% lower than its trading price of $26.6.

Both analysts stated that Intel could easily beat AMD by bringing a new architecture forward. This fear of Intel making a comeback and regaining the market share it had lost to AMD sent the latter’s stock on a downward path.

We’ll dig deeper into analysts’ views in the next article.

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