According to Woofun AI, Advanced Micro Devices (AMD.US) is deeply entrenched in a bear market triggered by broad selling in the artificial intelligence sector, with its stock closing at $504 on Friday, a 23.58% decline from its all-time high.
This decline directly caused the company’s market capitalization to drop from its October peak of $1.06 trillion to $824 billion, erasing over $236 billion. Ahead of its upcoming quarterly earnings report, market focus has moved beyond mere financial figures to a deeper scrutiny of the company’s business model—particularly whether its controversial "circular investment" strategy can continue to gain approval from capital markets amid today’s high valuations.
This model, known as "circular investment," where chip manufacturers invest in large technology companies in exchange for commitments to purchase their hardware, has become a core growth engine adopted by both AMD (AMD.US) and NVIDIA (NVDA.US). The most recent prominent example is AMD’s (AMD.US) $1 billion investment in Meta (META.US) (formerly Facebook), in exchange for which Meta (META.US) is expected to use part of the funds to purchase AMD’s (AMD.US) CPUs, GPUs, and networking equipment—Meta (META.US) is already one of AMD’s (AMD.US) largest customers.
In addition, AMD (AMD.US) has committed to investing $5 billion in Anthropic, the world’s largest AI research institute, which is already using AMD (AMD.US) solutions to train its AI models.
Woofun AI's compiled data shows that although such transactions can secure long-term orders, investors remain skeptical about the financial transparency and actual profitability of these related-party transactions, especially as Intel (INTC.US) suffered its worst single-day performance ever due to disappointing earnings, and NVIDIA (NVDA.US) saw its stock price drop by double digits from its peak, leaving the entire GPU industry facing a severe crisis of trust.
Under this context, analysts expect AMD's (AMD.US) revenue for the September quarter to increase 41% year-over-year to $13 billion, with earnings per share rising from $1.20 in the same period last year to $1.94, driven primarily by strong growth in AI-related GPU and CPU businesses.
However, based on the historical performance of companies such as Micron Technology (MU.US), SanDisk (SNDK.US), and Samsung Electronics, most AI companies have seen their stock prices decline after earnings releases, reflecting market sensitivity to high expectations and ongoing concerns about an AI bubble.
From both the derivatives market and technical perspective, downward pressure remains significant. The put/call open interest ratio in the options market is only 1.03, indicating more put options than call options, with the majority of puts concentrated at an exercise price of around $490—just 3% below the current stock price—suggesting a widespread market expectation of further downside. Technically, AMD (AMD.US) stock has declined slowly from its October high of $660 to its current level of $504. Although it briefly rebounded last week to $577, it has since retreated again. The stock has now broken below the key 23.6% Fibonacci retracement support level and is trading below the 50-day moving average, with the SuperTrend indicator also turning red. In the absence of a strong fundamental reversal signal, the stock is likely to continue declining toward the 50% retracement support at $421, representing a further 16.25% downside from current levels.
AMD's (AMD.US) earnings report is not only a test of its execution on its AI strategy but also a reassessment of the entire semiconductor industry's valuation logic. Against the backdrop of circular investment models drawing regulatory and financial scrutiny, even if revenue figures meet expectations, the market may opt to sell off due to concerns about long-term sustainability. This follows Intel's (INTC.US) earnings miss and represents another test of confidence for the semiconductor sector—investors must remain vigilant to the risk of divergence between short-term data strength and long-term valuation restructuring.