Image Source: Unsplash

Advanced Micro Devices (AMD) recently posted stellar earnings, driven by record data center revenue.

Despite getting caught in early August’s market volatility, the stock has swiftly regained its losses.

While Nvidia continues to dominate the AI sector, AMD’s future investments in AI remain a critical focus for investors.

However, technical analysis has raised some concerns, particularly with the formation of a “death cross” on AMD’s stock chart, sparking renewed fears of an AI bubble.

Here is what the chart looks like:

(Click on image to enlarge)

Source: TradingView

The death cross, a bearish technical indicator, occurs when the 50-day moving average dips below the 200-day moving average, signaling a potential shift from a bullish to a bearish trend.

Currently, AMD’s 50-day moving average is teetering on the brink of crossing below the 200-day mark. The recent price rally has helped the stock gain momentum, but the risk of the death cross materializing remains a concern.

The stock has also bounced off a crucial support level, adding another layer of complexity to its technical outlook. Earlier in August, AMD’s price dipped below this support level due to market volatility but quickly rebounded.

The key question now is whether AMD can maintain this upward momentum. If the stock falls below the support line again, it could coincide with the death cross, potentially triggering a more sustained bearish trend.

(Click on image to enlarge)

Source: TradingView

Adding to the uncertainty, Nvidia is set to announce its quarterly earnings report on August 28.

This report is being touted as one of the most significant for the tech sector in recent years. A disappointing performance from Nvidia could not only impact AMD but also send shockwaves through the broader market.

The looming fears of an AI bubble have further complicated the outlook for AMD.

Wedbush Securities disagrees with AI bubble notion 

However, Dan Ives, a senior equity analyst at Wedbush Securities, strongly disagrees with the notion that AI is a bubble.

Ives, who has a deep understanding of market cycles, having witnessed the dotcom bubble firsthand, points out key differences between the two scenarios.

He argues while the dotcom bubble was characterized by an influx of unproven startups, the AI rally is being driven by established giants like Nvidia that are miles ahead in providing the infrastructure for the AI revolution.

Ives also notes that AI infrastructure investments are not slowing down anytime soon.

According to him, companies like AMD and Nvidia stand to benefit significantly from the trillion-dollar investments pouring into AI.

Unlike the dotcom era, where speculative ventures fueled the bubble, today’s AI boom is supported by substantial demand from major tech companies with deep pockets, ensuring that both AMD and Nvidia will continue to capture a large share of the AI market.

Despite these reassurances, AMD’s stock has remained relatively flat in today’s trading, following its recovery from the losses incurred after last month’s earnings report.

As the AI debate rages on, investors will be closely watching AMD’s performance, particularly in light of Nvidia’s upcoming earnings, to gauge whether the stock’s recent rally can be sustained or if it’s time to brace for a downturn.

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