What Happened?
Shares of computer processor maker AMD (NASDAQ: AMD) jumped 3.6% in the afternoon session after the company's CEO, Lisa Su, stated that the company plans to substantially increase manufacturing capacity as demand for artificial intelligence processors and CPUs continues to outstrip supply.
As reported by Reuters, this major supply expansion will involve securing additional capacity from Taiwanese supply chain partners, with Su specifically traveling to Taipei to hold discussions with TSMC and other key regional providers.
After the initial pop, the shares cooled down to $649.82, up 2.9% from the previous close.
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What Is The Market Telling Us
AMD’s shares are extremely volatile and have had 53 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 3% on the news that weaker-than-expected U.S. employment data cooled Treasury yields, easing interest rate pressure. The Bureau of Labor Statistics reported that nonfarm payrolls increased by 29,000 in September, falling short of the 84,000 projected by economists polled by Dow Jones, while the unemployment rate rose to 4.2%. For the broader group, softer hiring eases interest-rate pressure on high-multiple growth equities by pulling borrowing costs lower.
However, further deceleration in the labor market risks dampening cyclical end-market demand across industrial and automotive chip channels. Semiconductor valuations expand when falling yields reduce the discount rate on long-duration earnings, provided enterprise infrastructure spending does not deteriorate.
AMD is up 191% since the beginning of the year, and at $649.82 per share, it has set a new 52-week high. Investors who bought $1,000 worth of AMD’s shares 5 years ago would now be looking at an investment worth $6,269.
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