Advanced Micro Devices (AMD 3.42%) stock has regained ground following big losses early in Wednesday's session, but it's still in the red today. The semiconductor company's share price was down 2.3% as of 2:30 p.m. ET, but it had been down as much as 7.9% earlier in trading.
There doesn't appear to be any fresh, business-specific news driving AMD's pullback today. Instead, the sell-off is being propelled by the market's analysis of Broadcom's recent quarterly report.
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The market's reaction to Broadcom's earnings is weighing on AI stocks
After the market closed yesterday, Broadcom published results for the second quarter of its current fiscal year -- which ended May 3. The company reported non-GAAP (adjusted) earnings per share of $2.44 on sales of $22.19 billion. Adjusted earnings topped the average analyst estimate by $0.04 per share, and sales exceeded the average analyst estimate by $70 million.
Broadcom's revenue increased nearly 48% year over year, but the company's forward guidance wasn't enough to impress the market. For the current quarter, the tech company guided for sales of roughly $29.4 billion -- which actually exceeded the average analyst estimate's call for sales of approximately $28.47 billion. Despite beating the average target, expectations were sky high heading into the report -- and AMD and other AI stocks are seeing valuation pullbacks as the market reassesses valuations in the space.
NASDAQ: AMD
Key Data Points
What's next for AMD?
Despite today's modest pullback, AMD stock is up approximately 352% over the last year. With a market capitalization of roughly $864 billion, AMD is valued at approximately 72 times this year's expected earnings and 17.5 times this year's expected sales. While the company is positioned to benefit from AI-related tailwinds, its stock is also priced for very strong business execution. So while shares still offer upside potential, there's a risk the future results will underwhelm the market or the overall AI trade will lose steam.
