AMD's rally slows as profit-taking risks grow
After a sharp rally, AMD shares are gradually losing upward momentum. Investors are beginning to focus not only on the long-term prospects of artificial intelligence but also on whether buyers are still willing to pay current valuations.
The biggest event for the semiconductor sector was the wave of profit-taking that followed Micron's strong earnings report. Despite the memory maker delivering record financial results, investors chose to reduce exposure to AI-related stocks, putting additional pressure on AMD and other chipmakers.
A similar scenario could unfold on August 26, when AMD releases its own quarterly earnings. After the stock has gained more than 500% over the past year, many investors may choose to lock in profits regardless of the results.
AMD faces a decisive test at $500
The $500 level is now the key technical support for AMD. As we pointed out earlier, a break below this level would increase the likelihood of a decline toward $482, where both a major support level and the local trendline converge.
With each break of nearby support, the probability of the bearish RSI (14) divergence playing out continues to increase. If confirmed, this signal could accelerate the correction toward the $450–435 range.
If AMD manages to hold above $500, the stock is likely to rebound toward the $525–530 range.
Profit-taking risks outweigh upside potential
AMD shares have gained more than 550% in just over a year—an exceptional performance. During that period, every quarterly earnings report exceeded analysts' expectations, helping to fuel the rally.
However, the situation is now changing. Regardless of how strong AMD's next earnings report may be, the risk of profit-taking could outweigh the potential for further gains. As fear and greed begin to dominate investor psychology, many market participants may decide to lock in at least part of their substantial profits.
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