The AMD stock price has been in a strong bull run and is hovering at a record high as investors waited for the latest financial results, which will provide more color on the health of the artificial intelligence industry. It was trading at $260, up by over 220% from its lowest level this year.

AMD earnings preview 

AMD, a top player in the semiconductor industry, will be in the spotlight this week as it releases its financial results, which will provide more color on its revenue growth and the health of the AI industry.

These results come at an important period for AMD, which has become the best alternative to NVIDIA in the AI industry, where its GPUs are slowly becoming popular.

Most recently, the company reached a multi-billion-dollar deal with OpenAI, which will see the latter have the option to buy a 10% stake in the company. OpenAI wants to diversify its operations from NVIDIA and has already inked a custom chip deal with Broadcom. 

The upcoming results will not include this deal as AMD will start its deliveries in the second half of the year. AMD believes that it will receive over $100 billion in revenue from the deal.

Analysts expect the upcoming results to show that AMD’s revenue rose by 28% in the third quarter to over $8.75 billion. Its earnings-per-share is expected to come in at $1.17, up from the 92 cents it made in the same period last year. 

At the same time, analysts expect AMD’s forward guidance to show that its annual revenue for the year will be $33 billion, up by $28 billion last year. Odds are that the company will generate higher revenues and profits as the management tends to be highly conservative when issuing its guidance.

Valuation concerns remain 

The most recent results showed that AMD’s revenue rose to $7.7 billion in the second quarter of the year, up from the $5.8 billion it made last year. This revenue was primarily driven by its Ryzen and EPYC processors, which are used in data centers.

AMD’s gross margin dropped to 40% from 49% because Donald Trump ordered it and Nvidia not to sell products to China during the quarter. As a result, the company suffered $800 million inventory charges.

Still, the main risk for the company is that it is highly expensive. It has a forward PE ratio of 113.6, much higher than  Nvidia’s 50, and the sector median of 32. The GaaP PE ratio is 65, also much higher than the sector median of 25.

These validation numbers are also higher than its historical averages. AMD’s five-year average is 93, meaning that it is currently trading at a premium because of the deal with OpenAI. Still, as we saw with Palantir stock, it will need to publish strong financial results and offer more positive guidance.

AMD stock price technical analysis 

AMD chart by TradingView

The weekly timeframe chart shows that the AMD stock price has been in a strong uptrend in the past few months, moving from a low of $76 in April to a record high of $260.

AMD shares have moved above the important resistance level at $225, which was the highest level in May last year. It has now invalidated the double-top pattern whose neckline is at $76.

The stock remains above the 50-week and 100-week Exponential Moving Averages (EMA).

Also, the Relative Strength Index has moved to the extremely overbought level at 80. Therefore, there is a risk that the AMD share price will retreat and possibly retest the important support level at $225 after its earnings. Such a drop will be bullish as it will be a break-and-retest pattern.

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