Bearish sentiment toward Advanced Micro Devices Inc. intensified after the chipmaker's post-earnings selloff, with short-selling activity climbing to its highest level in two weeks as investors questioned whether the company's AI-driven growth can justify its lofty valuation.
AMD's short volume ratio rose to 62.6 during Wednesday's trading session, the highest reading in two weeks and well above the 55.15 recorded on July 31, according to Fintel data cited by Finbold. A higher short volume ratio indicates that bearish trades outnumber bullish ones.
The surge in short interest followed a sharp decline in AMD shares after the company reported quarterly results that topped Wall Street estimates on revenue and earnings but failed to satisfy investors looking for stronger guidance on AI-driven growth.
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AMD shares ended Wednesday's session down 7.04% at $482.05, wiping out nearly $59 billion in market value, according to Reuters calculations. The stock extended losses in pre-market trading on Thursday, falling another 0.99% to $477.30, signalling that selling pressure has persisted.
Investors appeared to focus more on the company's revenue outlook than on its earnings beat, amid growing scrutiny over whether the semiconductor industry's multibillion-dollar investments in artificial intelligence will translate into faster revenue growth.
One explanation for the selloff is that market expectations had risen well beyond analysts' forecasts, leaving little room for even a strong earnings report to impress investors. Another factor weighing on sentiment was Elon Musk's announcement on the same day that SpaceX would exclusively use Nvidia's AI chips, reinforcing Nvidia's dominance in the AI infrastructure market.
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Despite the market reaction, Wall Street analysts have remained largely constructive on AMD. The company continues to carry a consensus "Strong Buy" rating, with an average 12-month price target of $635.82, suggesting analysts expect the recent weakness to prove temporary.
Recent trading patterns in other AI-linked technology companies also point to a possible recovery. Alphabet and Meta Platforms both fell sharply immediately after reporting earnings before recovering much of those losses in subsequent weeks.
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