In a crowded field of semiconductor stocks powered by the artificial intelligence (AI) theme, it can be difficult to distinguish yourself. AMD took a simple approach — outperform your peers. Despite recent short-term challenges, its star continues to shine.
AMD Unfazed By Revenue Split
Tariffs remain a wild card, and AMD bulls were nervous, as a sizeable portion of its semiconductor sales come from China. However, along with Nvidia, AMD agreed to share a portion of its sales to China with the U.S. government, which allayed some of those fears.
Including the aforementioned Nvidia, AMD is also outpacing Broadcom and Taiwan Semiconductor Manufacturing year-to-date. This comes after the chipmaker reported a revenue beat, but fell just shy of Wall Street’s earnings per share estimates.
Nonetheless, its inclusion in the AI story continues to provide wind in its sails. AMD is the second largest AI chipmaker, making it runner up to Nvidia who occupies a large portion of that market.
Bullish traders looking ahead were appeased to hear that AMD was announcing the release of new AI chips in 2026. However, tariffs on China may have blunted any hopes of a sharp increase in its stock price, but the new deal quieted that noise. Per the Financial Times, AMD will be given a license to sell its chips to China in exchange for a 15% cut of its revenue with the U.S. government.
Two Sides of the AMD Trade
Traders with a half-glass full mentality will say that giving up 15% of its revenue is better than anything larger — or worse, keeping nothing at all.
“From an investor perspective, it’s still a net positive, 85% of the revenue is better than zero,” said Ben Barringer, global technology analyst at Quilter Cheviot.
On the other hand, the euphoria over the deal could dissipate quickly. If sales to China grow at a rapid pace, the U.S. government may want a bigger slice of that revenue pie.
“In the short term, the deal gives both companies some certainties for their exports to China. For the long term, we don’t know if the U.S. government may want to take a bigger cut from their China business especially if their sales to China keep growing,” said George Chen, partner and co-chair of the digital practice at The Asia Group.
This is where flexibility in the trading environment is necessary. In the case of AMD, traders can use the Direxion Daily AMD Bull 2X Shares (AMUU) and the Direxion Daily AMD Bear 1X Shares (AMDD). The former offers 200% of the daily performance of AMD, while the latter can short the stock should any negative news surprise traders. A tactical trader looking to hedge their bullish position or stay closer to market neutrality can use both funds side by side.
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