As AI investment sentiment falters, one company stands firm: AMD

Amid the growing cracks in the AI investment landscape, one name continues to shine: AMD. As Anthropic prepares for its initial public offering and CoreWeave faces financial challenges, the broader AI sector has shown signs of instability. CoreWeave’s stock dropped 15.5% on October 14, with its 2032 notes’ yields rising to 15%, and its default swap spreads nearly doubling in October. Similarly, IREN has declined over 20% year to date. These developments have even affected chipmakers, with AMD experiencing an 8.1% drop on October 13, influenced by Meta’s financing plans and a supply warning from Lam Research, which exacerbated concerns about AI spending.

Despite these challenges, AMD remains a standout. My screening criteria, which typically narrows down a robust list of potential outperformers, leaves only one name on the list: AMD. The criteria include a stock price above the 200 day moving average, revenue and earnings growth at least as fast as the S&P 500, rating upgrades, a PEG ratio below 3, and return on equity and return on invested capital of at least 12%. AMD meets all these criteria, with projected Q3 earnings of $1.94 billion on revenue of $13.06 billion, compared to $1.20 billion and $9.25 billion a year ago, representing YoY growth of nearly 62% and 41%, respectively.

However, even with strong fundamentals, the recent market environment has been volatile. On October 6, AMD’s CEO Lisa Su announced plans to significantly increase supply in 2027 due to persistent AI order backlogs. This suggests that while AMD is well positioned, it is not immune to broader market fluctuations.

To balance the risks and opportunities, one strategic approach could be to use options. Owning the stock outright carries significant volatility; over the past four quarters, the smallest earnings related move over a similar window was more than 9%, and the largest was 38%. While this volatility can be managed through options, selling both a put and a call can reduce the long call purchase by 66%, while also providing a buffer against downside risk. A call spread risk reversal, specifically, can mitigate risk if the cracks in the AI trade widen, and the short options offset the elevated volatility.

While owning AMD outright would require absorbing a roughly 9% to 11% earnings related move, a call spread risk reversal strategy could offer a way to stay in the trade with considerably less risk. By sacrificing about $1,700 of upside for $5,000 in outperformance during a severe downside move, investors can reduce their overall risk exposure.

Source: https://www.cnbc.com/2026/10/26/-as-ai-becomes-more-fractured-one-names-stands-out-amd.html