What Happened?
A number of stocks jumped in the afternoon session after the semiconductor sector continued to rally as a favorable July inflation report boosted investor confidence for a potential Federal Reserve interest rate cut in September. Lower-than-expected inflation data for July increased market expectations for a Federal Reserve interest rate cut next month, with futures markets pricing in a 96.2% probability. A potential rate cut lowers borrowing costs, which is particularly beneficial for growth-oriented sectors like technology and semiconductors as it can fuel investment and expansion.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Analog Semiconductors company Magnachip (NYSE: MX) jumped 3.6%. Is now the time to buy Magnachip? Access our full analysis report here, it’s free.
- Processors and Graphics Chips company AMD (NASDAQ: AMD) jumped 5.4%. Is now the time to buy AMD? Access our full analysis report here, it’s free.
- Analog Semiconductors company NXP Semiconductors (NASDAQ: NXPI) jumped 4.3%. Is now the time to buy NXP Semiconductors? Access our full analysis report here, it’s free.
- Analog Semiconductors company onsemi (NASDAQ: ON) jumped 3%. Is now the time to buy onsemi? Access our full analysis report here, it’s free.
- Processors and Graphics Chips company Qorvo (NASDAQ: QRVO) jumped 3.4%. Is now the time to buy Qorvo? Access our full analysis report here, it’s free.
Zooming In On AMD (AMD)
AMD’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 6.7% on the news that its second-quarter earnings report showed that a large inventory charge related to U.S. export controls on its data center chips overshadowed record revenue. The semiconductor company posted a 32% year-over-year revenue jump to a record $7.7 billion. However, AMD also revealed an $800 million hit due to restrictions on its MI308 chip shipments to China. This charge pressured the company's profitability and caused its adjusted earnings per share of $0.48 to miss analyst expectations. The export curbs also squeezed the company's gross margin, which narrowed significantly from the previous year. Investors reacted negatively to the earnings miss and margin pressure, despite the strong sales figures.
AMD is up 51.7% since the beginning of the year, and at $182.96 per share, has set a new 52-week high. Investors who bought $1,000 worth of AMD’s shares 5 years ago would now be looking at an investment worth $2,236.
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