Advanced Micro Devices (AMD) experienced a volatile trading session on Tuesday, with shares ultimately closing 1.6% lower at $414.05. The decline came as investors reduced their exposure to semiconductor stocks ahead of Nvidia's highly anticipated earnings report, while a rise in Treasury yields added pressure on growth-oriented technology names.
The broader market's cautious tone was evident as the S&P 500 and Nasdaq Composite both fell for a third consecutive day. The 10-year Treasury yield climbed to its highest level since January 2025, a move that typically weighs on high-valuation growth stocks. "Rates are obviously front-and-center," said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions. He noted that markets can tolerate a gradual rise in yields but not abrupt spikes.
Nvidia, a key bellwether for the AI chip sector, slipped 0.7% ahead of its quarterly results due Wednesday after the closing bell. Options markets are pricing in a potential swing of approximately $355 billion in Nvidia's market capitalization following the report, according to Reuters. The outcome is seen as a critical test for the AI trade, which has driven significant gains in chip stocks this year.
In contrast to AMD and Nvidia, Intel shares rose 2.4% on Tuesday, highlighting divergent performance within the semiconductor space. Analysts noted that the sector is not moving uniformly lower, with some investors selectively rotating among chipmakers.
On the analyst front, Citi's Atif Malik raised his price target on AMD to $460 from $358 on Monday, while maintaining a Neutral rating. Malik cited a potential expansion in the total addressable market for central processing units (CPUs), forecasting it could jump from $29.3 billion in 2025 to $131.5 billion by 2030, representing a compound annual growth rate of 35%.
AMD's recent performance has been bolstered by strong demand for both its EPYC server processors and Instinct graphics processing units (GPUs) used in AI workloads. The company reported first-quarter revenue of $10.3 billion, a 38% year-over-year increase, with data-center revenue surging 57%. CEO Lisa Su highlighted "accelerating demand for AI infrastructure" and "strong momentum" in inferencing and agentic AI applications. CFO Jean Hu noted "accelerating revenue growth" and "record quarterly free cash flow."
Looking ahead, AMD guided for second-quarter revenue of $11.2 billion, plus or minus $300 million, above Wall Street expectations. The company anticipates server CPU revenue to jump over 70% from the prior year. Analysts see AMD's opportunity extending beyond direct competition with Nvidia, as the growing complexity of AI workloads drives demand for both CPUs and GPUs. "It's increasingly about a broader compute opportunity," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
Despite the positive outlook, AMD faces risks. The stock trades at 42.4 times forward earnings, well above its five-year average and nearly double Nvidia's multiple, despite Nvidia's larger share of the AI market. Additionally, shortages in memory chips and rising component prices could pressure AMD's PC and gaming segments. As the market awaits Nvidia's results, Susquehanna's co-head of derivatives strategy, Chris Murphy, described the chip space as "a crowded leadership area," with traders pushing for more upside in Nvidia while covering gains in other names. This dynamic ties AMD's prospects not only to its own execution but also to Nvidia's ability to sustain the broader AI rally.
