Tag Archives: AMD

Short Sellers Grow More Selective on Semiconductor Stocks

Semiconductor trends are considered to be leading indicators of technology and broader electronics demand. In a wider sense, semiconductor and tech stocks are considered to be leading indicators for the markets in general. A strong rally in the tech sector pushed many of these companies to new highs, but with the return of volatility semiconductors will have to rally again if markets want to return to record levels.

The April 30 short interest data have been compared with the previous report. Short interest moves in these selected semiconductor stocks were mixed.

Intel Corp. (NASDAQ: INTC) saw its short interest decrease to 76.32 million shares. The previous level was 86.26 million. Note that, like AMD, Intel is one of the most shorted Nasdaq stocks. Intel shares were last seen trading at $54.25, in a 52-week range of $33.23 to $55.79.

The number of Advanced Micro Devices Inc. (NASDAQ: AMD) shares short decreased to 179.44 million from the previous level of 192.62 million. Shares recently traded at $12.05, in a 52-week range of $9.04 to $15.65.

Qualcomm Inc. (NASDAQ: QCOM) saw the number of its shares short fall to 16.89 million from the 20.03 million reported in the previous period. Shares were changing hands at $54.45, in a 52-week trading range of $48.56 to $69.28.

Short interest in Applied Materials Inc. (NASDAQ: AMAT) rose to 16.83 million shares. The previous reading was 14.46 million. Shares were trading at $54.70, in a 52-week range of $40.79 to $62.40.

Micron Technology Inc. (NASDAQ: MU) saw its short interest increase to 57.80 million shares from the previous reading of 53.50 million. Shares were trading at $51.85, in a 52-week range of $26.39 to $63.42.

And the short interest in Broadcom Ltd. (NASDAQ: AVGO) increased to 6.74million shares in the period from the previous 5.12 million. Shares were last seen at $240.25, in a 52-week range of $221.98 to $285.68.

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Upcoming Earnings: Nvidia Reports After Thursday's Close

NVIDIA Corporation (NASDAQ: NVDA) is scheduled to report Q1 fiscal 2019 earnings after the closing bell on Thursday, May 10. Ahead of earnings, NVDA has been climbing closer to its all-time high of $254.50 it hit in mid-March. The stock closed at $250.40 yesterday and was up slightly in pre-market trading this morning. 

After better-than-expected earnings reports from competitors Intel Corporation (NASDAQ: INTC) and Advanced Micro Devices, Inc. (NASDAQ: AMD), some analysts have suggested this could indicate a strong quarter for NVDA, although expectations are high for tomorrow’s report.

For the quarter, NVDA is expected to report adjusted EPS of $1.65 on revenue of $2.91 billion, according to third-party consensus analyst estimates. NVDA’s own guidance calls for $2.90 billion in revenue, plus or minus 2 percent. In the prior-year period, the company earned $0.79 on revenue of $1.94 billion. Also, the company has beat both earnings and revenue estimates in the past eight quarters.

Gaming and Data Center

The gaming segment still makes up a majority of the company’s revenue, and it has been its second-fastest growing segment behind data center. In Q4 fiscal 2018, gaming revenue was up 29 percent year over year to $1.74 billion. For all of fiscal 2018, gaming revenue increased 36 percent year over year to $5.51 billion. When NVDA reports on Thursday, analysts are expecting gaming revenue to be around $1.6 billion, up from $1.02 billion in the prior-year period.

Management has attributed strength in the gaming segment to continual growth in games that require the higher-end of their products. Strong sales of the Nintendo Switch, which uses NVDA’s Tegra processor, was another factor management cited as a growth contributor on last quarter’s earnings call. Management also acknowledged that cryptocurrency mining has been driving demand in the gaming segment as well, but it is difficult to quantify how much of their business comes from it.

NVDA’s data center segment is its second largest by revenue and has been its fastest growing recently. Last quarter, revenue was up 105 percent year over year to $606 million. For all of fiscal 2018, revenue in the segment was up 133 percent year over year to $1.93 billion.

NVDA launched the Tesla V100 GPU in Q2 fiscal 2018 and it has been a major driver of growth in the data center segment as sales ramped up over the past two quarters, according to management. Analysts are expecting data center revenue to come in at $656 million, up from $409 million in the prior-year period.

Automotive and Professional Visualization

Both the automotive and professional visualization segments have been two of the NVDA’s smaller segments, although management has said it is optimistic about the growth prospects of the two.

At CES 2018 in January, NVDA announced the DRIVE Xavier system on a chip (SoC) would start shipping to customers in a limited amount this quarter. The company has also announced numerous partnerships with major car companies and parts manufacturers that will use its autonomous vehicle platform, DRIVE PX.

When NVDA last reported, automotive revenue was up 3 percent year over year to $132 million and professional visualization revenue was up 13 percent to $254 million. 

nvidia-nvda-stock-chart-2018.png
CLOSE TO ALL-TIME HIGH. Since the end of February, NVDA has climbed to the low-$250 range several times, but hasn’t been able to break higher than its all-time high of $254.50 hit on March 13. Over the past year, the stock is up 143.25 percent, outperforming the S&P 500 (SPX) and Nasdaq 100 (NDX) by a wide margin. Chart source: thinkorswim® by TD Ameritrade.  Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Options Trading Activity

Around NVDA’s upcoming earnings release, options traders have priced in about a 5.7 percent stock move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform. As of this morning, implied volatility was at the 44th percentile, not too high ahead of the report.

In short-term trading at the May 11 weekly expiration, calls have been active at the 250 and 260 strike prices, while puts have been active at the 240 strike. At the May 18 monthly expiration, recent trading has been a lot heavier on the call side and concentrated at the 250 strike.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.

What’s Coming Up

Next week there is a string of companies from the retail sector reporting earnings. Home Depot Inc. (NYSE: HD) is scheduled before market open Tuesday, May 15, Macy’s Inc. (NYSE: M) before market open Wednesday, May 16, and Walmart Inc. (NYSE: WMT) before market open on Thursday, May 17. Deere & Company (NYSE: DE) is also scheduled to report before the open on Friday, May 18.

Some of the next major economic reports coming up include the consumer price index (CPI),  which is released tomorrow morning. Next week, April retail sales are released the morning of Tuesday, May 15, and April housing starts are released the morning of Wednesday, May 16. If you have time, check out today’s market update for a look at what else is going on.

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

Investor Movement Index April Summary

This article was originally published on TD Ameritrade's IMX page.

Monthly Summary

The IMX moved lower for the fourth month in a row, ending the period down 8.24 percent at 4.79.

The April IMX period started out with volatility in equity markets, and the IMX took another dip lower. Continuing their behavior for the past year, TD Ameritrade clients were net buyers during the period. However, many widely held positions saw their volatility relative to the overall equity market decrease once again, causing a decrease in the overall IMX score. Volatility of the S&P 500, as measured by the Cboe Volatility Index, or VIX, averaged over 20 for the first five days of April before subsiding near the end of the period.

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April began with equity market volatility, and all three major equity indices moved lower during the first five business days of the month. The S&P 500 traded lower by 2.2 percent during the first day of April, its worst start ever to a second quarter. Markets rebounded during the last three weeks for the period, with the S&P 500 ending the period up 1.10 percent. The NASDAQ Composite Index and Dow Jones Industrial Average also increased during the period, up 0.80 percent and 0.86 percent, respectively. Market volatility was in part driven by global economic concerns following the Trump administration's proposed tariffs on $50 billion of goods from China. Following the market selloff early in the period, the S&P 500 traded at the lowest price-to-earnings ratio in nearly two years compared to expected earnings over the next 12 months, although the metric is still higher than historical averages. Later in the period, geopolitical tensions in Asia seemed to ease and some solid corporate earnings helped push equity markets higher.

Trading

TD Ameritrade clients were net buyers during the April period, buying some volatile names during earnings season. Netflix, Inc. (NASDAQ: NFLX) was net bought for the third month in a row. The company reported better-than-expected earnings during the month, but traded lower after reports it may purchase a movie theatre chain. For the first time in 2018, AT&T Inc. (NYSE: T) was net bought as the company traded lower following an earnings miss due to cord-cutting increases. Spotify Technology SA (NYSE: SPOT) was also a net buy following the company's IPO early in the period. Advanced Micro Devices, Inc. (NASDAQ: AMD), which has seen volatility recently and posted an earnings beat, was net bought. For the fifth month in a row, Amazon.com, Inc. (NASDAQ: AMZN) was net bought. The company traded higher during the period on the back of an earnings beat and analyst upgrades. Square Inc. (NYSE: SQ), which was off approximately 20 percent from recent highs as the company announced an acquisition of another online company, Weebly, was also a net buy.

Additional popular names bought include General Electric Company (NYSE: GE), Alibaba Group Holding Ltd. (NYSE: BABA), and JPMorgan Chase & Co. (NYSE: JPM).

TD Ameritrade clients appeared to take some profits in multiple names during the period. Oil companies were popular sells with ConocoPhillips (NYSE: COP), BP  PLC (ADR) (NYSE: BP), National-Oilwell Varco Inc. (NYSE: NOV), and Transocean LTD (NYSE: RIG) all net sold. Oil prices traded near three-year highs on higher global demand and possible OPEC-led production cuts. COP and BP both traded at multi-year highs, while NOV and RIG reached 52-week highs, enticing clients to take profits in all four names. Alcoa Corp. (NYSE: AA) traded at levels not seen since before the financial crisis following proposed tariffs on steel and aluminum, and was net sold. For the third month in a row, Facebook, Inc. (NASDAQ: FB) was net sold after CEO Mark Zuckerberg testified before Congress regarding the misuse of user data and a beat on earnings.

Additional names sold include Starbucks Corporation (NASDAQ: SBUX), Chipotle Mexican Grill (NYSE: CMG), and Frontier Communications Corp. (NASDAQ: FTR).

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

Historical Overview

TD Ameritrade's Investor Movement Index (IMX) has generally correlated with the S&P 500 as clients react to equity price movements, but the index has gone through uncorrelated periods. Beginning in January 2010, when TD Ameritrade started tracking the IMX, the index rose with equity markets until April 2010, when it peaked at 5.40. In May 2010 investors experienced the "Flash Crash" and the IMX began a sharp downward trend. The IMX didn't reach 5.00 again until the S&P 500 was well above April 2010 levels.

The index eventually peaked at 5.56 in June 2011. This peak was immediately followed by a plunge in equity markets, and in the IMX, as the media was dominated by the U.S. debt ceiling debate, S&P downgrade of U.S. debt, and European debt concerns. The S&P 500 began to recover in the fall of 2011, but the IMX continued to decline until it reached a new low at the time in January 2012. As the S&P 500 began to sustain an upward trend in early 2012, the IMX started to rise. In 2013, as economic conditions improved and the S&P 500 climbed to record levels, the IMX rose to the high end of its historical range, finishing 2013 at 5.62, and continued to rise in 2014 amid geopolitical tensions related to Ukraine and the Middle East, until seeing slight declines in October and November.

By the middle of 2015, the IMX had seen increases, as equity market volatility had reduced to near historical levels while the market continued its upward trend. As 2015 ended its third quarter, volatility had returned to markets as global economic concerns and speculation around the timing and trajectory of Federal Reserve rate increases seemed to rattle overall equity markets. This uncertainty continued to play a role in the equity markets through the fourth quarter of 2015 and into early 2016. The volatility accompanying this uncertainty abated in the second quarter of 2016 and remained low until late in the third quarter. Just as it had in 2015, the IMX saw increases mid-year during the period of lower volatility. The IMX continued to climb into the fourth quarter reaching 5.83 in October 2016, its highest point in two years. A brief spike in volatility during November, timed around the U.S. presidential election, coincided with a slight pull back in the IMX, which then ended 2016 at the high end of its historical range.

The IMX started 2017 with an upward trend and reaching an all-time high in March, before pausing in April as lower volatility led to a decrease in the IMX. The momentum resumed in May, with the IMX breaching 7.0 for the first time ever in July of 2017. The IMX took another brief pause in September, before following markets higher and breaching 8.0 for the first time ever in November and ending 2017 at an all-time high. Volatility returned to the markets in early 2018, and the IMX decreased for three consecutive months to start the year.

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

AMD's Golden Run Might Be Coming to a Close

Advanced Micro Devices (NASDAQ:AMD) has been thriving by undercutting rivals Intel (NASDAQ:INTC) and NVIDIA (NASDAQ:NVDA) on pricing. The company’s strategy of offering consumers cutting-edge chips at lower prices has worked wonders, as it has managed to corner a big share of the graphics card market for itself, while cutting its teeth in the Intel-dominated central processing unit (CPU) space at the same time.

Consider this: AMD’s graphics processing unit (GPU)market share shot up to 33.7% during the final quarter of 2017 as compared to 21.1%in 2015, according to Jon Peddie Research. The company engineered this rise by first moving into the low- and mid-tier GPU marketswith its Polaris cards in2016, and then moving into the premium segment with Vega last year.

AMD followed a similar strategy in the CPU market, where Intel was holding an absolute majority. It launched chips at halfthe prices that Chipzilla was charging, and resorted to pricecuts during the recent holiday period to move more chips. Not surprisingly, CEO Lisa Su claimed that AMD’s CPU sales tripled late last year, boosting its market shareto 12% from 9.1% in the space of just over a year.

Wall Street has appreciated AMD’s efforts as the launch of its new products has coincided with a rise in its key financial metrics.

But AMD’s strategy of low-balling its opponents isn’t sustainable. The improvements in its revenue and margins have been driven by bigger factors at play, and it might not be long before its strategy stops working. Here’s why.

A bear on a line chart with a downward trend

Image source: Getty Images.

AMD’s real catalyst

The chart belowshows that AMD’s margins hit an inflection point sometime in late 2016, but the actual recovery started last year. This coincided with what’s being called the worstGPU shortage in history, as cryptocurrency mining-led demand priced gamers and PC enthusiasts out of the market. Miners were willing to pay a massive premium for GPUs to mint money from the crypto boom, so the pricesof mid- and high-end GPUs doubled.

AMD Net Income (TTM) Chart

AMD Net Income (TTM) data by YCharts.

AMD was in the right place at the right time to take advantage of this GPU shortage as it had just launched its Vega GPUs. In fact, AMD was reportedly the primebenefiter of crypto-related sales, with $776 million worth of GPU revenue last year.

A Vega RX 64 GPU that was pricedat $499 initially was going for more than$750 on the market at the end of March this year, while the RX Vega 56 was selling for almost $800 last month as compared to its launch price of $400. This spike in GPU prices positively impacted AMD’s revenue and margins.

The company gained 3 percentagepoints’ worth of gross margin last year as the revenue mix improved, allowing it to post $179 million in net income as compared to a net loss of $117 million a year ago. But the bad news for AMD is that the GPU price rise won’t last forever, and once prices hit parity, NVIDIA could get back into the game.

Normalizing prices pose a challenge

AMD’s Vega graphics cards weren’t up to the mark when they came out, delivering only marginal gains over NVIDIA’s 2-year-old offerings without much of a price difference. Moreover, the Vega GPUs have been known to be power hungry, so users running them incur additional costs in the form of electricity bills.

So, when GPU prices start normalizing, and they already have, Vega might not find many takers. For instance, the price of the RX Vega 56 has droppedfrom as much as $2,000 in January to $650 lately. By comparison, the relatively more powerfulNVIDIA GTX 1080 was at $1,200 in January and has now dropped to $700, which is very close to the price of AMD’s offering.

So, AMD will fall harder as supplies increase to bring back gamers who were earlier priced out of this market. Another factor that will hurt AMD is the launch of a specialist cryptocurrency mining chip. Chinese company Bitmain is reportedly developing a dedicated cryptocurrency mining chip that’s supposedly more efficient than GPUs in terms of power consumption and performance. Such a development has the potential to knock the wind out of AMD’s sails.

Meanwhile, AMD’s second-generation Ryzen processors have been priced way below their predecessors last year. The flagship Ryzen 2700X has been pricedat $329 this year, far less than last year’s $500 price tag for the Ryzen 1800X. What’s surprising is that this year’s chip is slightly more powerfulthan last year’s offering. This possibly means that AMD is looking to grab more market share from Intel, but its decision could backfire and weigh on its margins as the safety net of strong GPU prices slips away.

Now, we have already seen that AMD has been barely profitable over the past year, so it runs the risk of falling back into the red because of the lack of pricing power and superior products from rivals. Additionally, the likes of Intel and NVIDIA have way stronger margins than AMD, so they can easily lower the prices of their chips to protect market share.

AMD Operating Margin (TTM) Chart

AMD Operating Margin (TTM) data by YCharts.

Buying AMD doesn’t make sense

AMD is an extremely expensivestock with a price-to-earnings (P/E) ratio of almost 250. In comparison, both NVIDIA and Intel are way cheaper,with trailingP/E multiples of 48 and 26, respectively. Getting into AMD at this valuation isn’t a good idea given the potential margin challenges that it might face.

Moreover, analysts don’t expectany growth whatsoever in AMD’s earnings over the next five years. So, there’s a possibility that AMD’s golden run could be over, as the prime catalyst that has powered its growth is waning.

Fridays Vital Data: Intel Corporation (INTC), NXP Semiconductors N.V. (NXPI) and Alibaba Group Ho

U.S. stock futures are trading broadly lower this morning. Wall Street was clearly anxious ahead of this morning’s April jobs report. Expectations were for a gain of 188,000 last month, on the heels of March’s surprisingly low 108,000 job adds.

stock market today

Meanwhile, corporate earnings continue to chug along. Alibaba Group Holding Ltd (NYSE:BABA), Celgene Inc. (NASDAQ:CELG) and GoPro Inc. (NASDAQ:GPRO) are front and center on the earnings front.

Heading into the open, futures on the Dow Jones Industrial Average are down 0.33%, S&P 500 futures have shed 0.35% and Nasdaq-100 futures have lost 0.42%.

Turning to the options pits, volume rebounded to normal levels on Thursday. Overall, about 19.9 million calls 18.8 million puts crossed the tape. Despite the jump in call activity, the CBOE single-session equity put/call volume ratio surged to a one-month high of 0.75. The 10-day moving average also moved higher, hitting it’s own one-month high of 0.66.

Options traders were once again paying sharp attention to the semiconductor sector. News broke that “next generation” flaws were again found in Intel Corporation (NASDAQ:INTC) chips, driving heavy volume on INTC stock. Additionally, NXP Semiconductors N.V. (NASDAQ:NXPI) reported weaker-than-expected earnings, drawing attention to options arbitrage spreads in it’s Qualcomm Inc. (NASDAQ:QCOM) merger deal. Finally, Alibaba Group Holdings was call heavy heading into this morning’s quarterly earnings report.

Let’s take a closer look:

Friday’s Vital Options Data: Intel Corporation (INTC), NXP Semiconductors N.V. (NXPI) and Alibaba Group Holding Ltd (BABA)investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-300×136.png 300w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-200×90.png 200w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-400×181.png 400w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-116×52.png 116w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-100×45.png 100w, investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-111×50.png 111w,https://investorplace.com/wp-content/uploads/2018/05/05-04-2018-Top-Ten-Options-78×35.png 78w” sizes=”(max-width: 518px) 100vw, 518px” />

Intel Corporation (INTC)

Options traders loaded up on Intel calls yesterday. It was an interesting reaction to news that “next generation” flaws had been found in Intel semiconductors. Specifically, a German computing magazine reported yesterday that researchers found eight new flaws in INTC chips resembling the Meltdown and Spectre bugs revealed earlier this year.

Intel said it was aware of the flaws and was working to patch them. “We believe strongly in the value of coordinated disclosure and will share additional details on any potential issues as we finalize mitigations,” Intel said in a statement.

In a “been there, done that” kind of response, INTC options traders loaded up on call options following the news. Volume came in at 177,000 contracts, with calls gobbling up 83% of the day’s take.

Looking out to May options, the bulls appear to be in firm control of Intel’s short-term sentiment backdrop. Currently, the May put/call open interest ratio comes in at 0.45, with calls more than doubling puts for the series.

But this Intel optimism is not without merit. In fact, INTC stock continues to outperform most of its semiconductor peers, including red-hot names like Advanced Micro Devices, Inc. (NASDAQ:AMD) and Micron Technology Inc. (NASDAQ:MU).

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NXP Semiconductors N.V. (NXPI)

If you are arbitraging Qualcomm’s buyout of NXP Semiconductors, yesterday was painful for you. NXPI stock plunged more than 10% after the company missed Wall Street’s first-quarter earnings target by 12 cents per share. NXPI is now trading about 36% below Qualcomm’s buyout offer of $127.50 per share.

The deal has been slowed by Chinese regulators, whom many argue are dragging their feet due to troubled China/U.S. trade relations.

NXPI options traders were somewhat bullish following the news. Volume rose to 190,000 contracts, nearly tripling NXPI’s daily average. Calls made up about 58% of the day’s take. But while short-term options are optimistic, August options are downright bearish.

Qualcomm and NXP expect a ruling from China by their new deal deadline of July 25. If the August put/call OI ratio of 1.80 is any indication, NXPI options traders believe the deal will fall apart.

Alibaba Group Holding Ltd (BABA)

Alibaba calls were quite popular ahead of this morning’s quarterly report. Volume rose to an impressive 406,000 contracts, with calls eating up 71% of the day’s take. As a result, the May put/call OI ratio fell to 0.67 as traders bet on a post-earnings rally.

Heading into the open, BABA stock is up 1.5% amid a weak start among the major market indexes.

By the numbers, Alibaba posted another blowout quarter. Earnings rose 32% year-over-year to 90 cents per share, topping expectations by 5 cents per share. Sales surged 61% to $9.73 billion, easily beating Wall Street’s view for $9.3 billion.

As of this writing, Joseph Hargett held no positions on any of the aforemen