Avoid the stock of advanced microdevices next month

Investors have rallied behind chip stocks amid advances in artificial intelligence (AI). Sector leader Nvidia ( NVDA ) is up nearly 150% since the start of 2024, and the VanEck Semiconductor ETF ( SMH ) is up 39.3% year to date. Advanced Micro Devices Inc (NASDAQ:AMD) stock is removed by NVDA after declining earningsup 1.2% at $148.11 last seen, but more bearish signals suggest trouble is ahead.

Rocky White, senior quantitative analyst at Schaeffer, just released his list of worst S&P 500 Index (SPX) stocks for September. AMD is the fifth-worst SPX component to hold next month, and it’s the only one semiconductor name on the list, averaging a 6.2% loss for September and finishing lower 90% of the time.

A separate study by White also notes that Stock Advanced Micro Devices it just reached one standard deviation from the 100-day trend line. According to this data, five similar signals have occurred in the last three years. One month after 60% of these signals, the stock had negative returns, with an average decline of 7.5%.

With these two bearish signals coinciding, AMD looks poised to pare its 0.5% year-to-date fractional lead and trim its more respectable 38.9% year-to-date gain. Shares are off their March 8 record high of $227.30 and risk a rebound near their August 5 year-to-date low of $121.82.

Options traders are also bullish on AMD. On the International Stock Exchange (ISE), Cboe Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX), the security’s 50-day call/put volume ratio of 1.97 is higher than 92% of readings from last year. Watch for a shift in optimism that could add more headwinds.