WHY DID $AMD CRASH AFTER GREAT EARNINGS?!?
In a Nutshell
AMD stock dropped despite beating earnings because its 171x earnings valuation left no room for disappointment, while capex tripled to $888M and Nvidia's Nvidia partnership highlighted AMD's second-tier position. SpaceX fell 7% after strong Q2 results ($7.8B revenue) because it's still burning billions annually with no clear path to profitability. Both stocks illustrate how high valuations and speculative narratives create post-earnings selloffs even when fundamentals beat expectations.
These notes were generated by AI and may contain inaccuracies.
SpaceX and AMD both reported better-than-expected earnings yet their stocks dropped, with SpaceX falling 7.2%. The analysis explores why strong earnings can lead to stock declines.
SpaceX remains highly speculative as a company that continues to lose billions of dollars annually while burning through capital via capex spending. The stock's volatility is unsurprising given its recent trajectory from $230 per share down to $104 within weeks of its IPO. A 7% decline after a 9% same-day run-up is consistent with its speculative nature.
AMD has demonstrated strong performance, rising from $180 per share to $600. However, other semiconductor and memory chip stocks like SanDisk and Marvel Technologies are outperforming AMD and are not experiencing post-earnings selloffs. SanDisk and Marvel Technologies report earnings tomorrow.
AMD reported strong earnings with EPS beating expectations and revenue reaching $11.5 billion, representing one of the company's best quarters. Despite these results, the stock declined because the market considers it overvalued after its substantial run-up. The market will not tolerate any signs of disappointment when a stock trades at such elevated levels.
AMD's capex spending tripled from $389 million to $88 million, exceeding investor expectations. Current market sentiment does not favor significant capex investments, as evidenced by similar concerns with Meta and Google. Investors are questioning whether AMD's increased spending will generate adequate returns.
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