HSBC downgraded AMD to a “Hold” rating, arguing that the stock’s recent strong rebound had already pushed market expectations to excessively high levels. The bank also pointed to meaningful supply-chain uncertainties surrounding mass production of MI450 rack-scale servers, while lowering its revenue forecast for AMD’s AI GPU business in 2026.

Following its recent rally, AMD’s valuation has expanded from roughly 19 times forward earnings to nearly 33 times projected 2027 earnings, leaving significantly less room for earnings disappointments.

In addition, AMD warned during its earnings call that gaming segment revenue in the second half of the year is expected to decline by more than 20% compared with the first half, as rising memory and component costs continue to weigh on consumer demand.

AMD reported fiscal first-quarter 2026 earnings on May 5, delivering particularly strong performance in its data center business, which helped accelerate overall revenue growth. Data center revenue alone rose 57% year-on-year during the quarter.

Despite the strong earnings report, the broader market environment continued to pressure the stock.

Semiconductor shares, which had previously outperformed the broader market due to AI-driven demand, came under pressure as investor sentiment shifted sharply.

The S&P 500 fell 1.19%, the Nasdaq dropped 1.75%, and the Dow Jones Industrial Average declined 0.86%, reflecting a broader risk-off market environment.

At the same time, a sharp rise in the US Producer Price Index and Federal Reserve inflation models suggesting interest rates could remain above 4% further intensified macroeconomic headwinds.

AMD also experienced substantial institutional selling activity.

ARK Invest reduced its AMD holdings by selling 13,148 shares through the ARKW ETF, representing approximately US$5.91 million in value.

Earlier this week, ARK had already sold AMD shares multiple times, making this latest reduction a continuation of the broader trend.

Market Analysis:

The latest decline appears to reflect profit-taking sentiment and broader macro-level risk aversion rather than a deterioration in AMD’s underlying fundamentals.

Notably, even with today’s decline, AMD still outperformed the S&P 500 by 3.68 percentage points.

This pullback appears more like a valuation correction, especially considering the stock remains near its 52-week highs.