For lack of a better description, Advanced Micro Devices (NASDAQ: AMD) stock fell off a cliff following the company’s latest earnings report and found itself 10.07% in the red on the daily chart once the February 5 morning bell rang.
The violent reaction is somewhat surprising as the semiconductor giant’s latest figures show the firm outperformed expert forecasts in terms of revenue – $7.66 billion instead of the predicted $7,53 billion – and earnings-per-share (EPS) – $1.09 instead of the expected $1.08.
Still, AMD’s failure to beat the estimates of data center revenue – which stood at $4.14 billion – by reporting a substantially lower $3.86 billion could hold the answer for the steep and rapid decline.
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Indeed, Advanced Micro Devices has suffered throughout 2024 due to its perceived failure to meet the expectations set by the ongoing artificial intelligence (AI) boom and to gain ground against its main competitor, Nvidia (NASDAQ: NVDA).
Could AMD stock collapse under $100?
Data center revenue has, due to the aforementioned boom, become a particularly watched metric given its importance for AI technology.
AMD stock’s February 5 collapse has also raised a dangerous possibility that the world’s other semiconductor giant might see its shares plunge below $100. Along with the data center revenue miss and the generally battered state of the equity, other recent developments appear to have solidified the downturn.
Specifically, as Finbold reported on February 3, Nvidia was itself at risk of collapsing under $100 once the novel Chinese DeepSeek AI model was unleased as it, due to its reported efficacy and cost-efficiency, cast doubt on the hundreds of billions invested in Silicon Valley.
As it operates within the same industry, AMD suffered from similar headwinds and the same can be said about NVDA stock’s reaction to the new series of President Trump’s tariffs – whether implemented, announced, or postponed.
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Still, it remains surprisingly difficult to predict if AMD is genuinely set for a plunge below $100. For months, experts and investors have been arguing that market reactions to developments pertaining to the chipmaker have not been rational.
Similarly, at least one JPMorgan (NYSE: JPM) analyst opined that Tesla’s (NASDAQ: TSLA) stock’s reaction to its own earnings report miss – a surprise rally – is divorced from the actual company performance.
Furthermore, NVDA shares’ reaction to DeepSeek was also described as wrong by Meta Platforms’ (NASDAQ: META) Yann LeCun, who pointed out that the breakthroughs achieved in developing DeepSeek are more likely to supercharge the AI sector than to crash it.
Finally, the overall air of irrationality can also be seen – albeit in a face-value assessment – by comparing the revenue, profits, and valuations of the two most famous semiconductor giants.
For 2024, Nvidia reported $60.9 billion in revenue – more than twice as much as AMD – and gross profit of $44 billion – nearly four times as much as AMD’s $12.7 billion. Simultaneously, Nvidia entered the new year with a valuation of $3.5 trillion and AMD with $203 billion – 17 times less.
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