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While Nvidia has been a clear chip favorite among investors keen to get exposure to the artificial-intelligence boom this year, Jensen Huang’s company may have a contender.
When retail investors began moving back into markets as hopes emerged that the Federal Reserve would pivot toward cutting interest rates next year, they first moved into crypto stocks and more recently into the semiconductor sector, according to the team at Vanda Research in a new note to clients. That interest in chip stocks has been fueled by the hunt for opportunities among Nvidia’s
NVDA,
competitors, they say.
Key Words (October 2023): ‘Nobody in their right mind would do it.’ Nvidia CEO Jensen Huang says he wouldn’t start a company if he had a do-over.
Leading the charge into those names has been Advanced Micro Devices
AMD,
whose shares have been climbing since an early December AI event, observes Vanda’s Marco Iachini, a senior vice president there; andGiacomo Pierantoni, head of data; and Lucas Mantle, a data-science analyst.
They say the past five trading sessions have seen record inflows into AMD shares, which, in their stated view, could just keep going.
If the “macro backdrop stays conducive to risk,” and Federal Reserve members don’t start to talk down the dovish message from the central bank on Wednesday, “we expect that feedback loop of retail flow and positive performance to feed on itself.”
“That’s because despite AMD [as] the second most popular retail pick over the past two years … has significantly lagged [Nvidia’s] 2023 rise,” observes the Vanda Team. AMD shares have gained 100% to date in 2023 versus the gain of 172% afforded Nvidia.
Vanda Research
“But if momentum in semi stocks persists, then individual traders could easily make AMD their new [No. 1] pick as they attempt to push the stock to close the gap with its main competitor,” says the Vanda team.
Other chip names have also been getting a boost, with Broadcom
AVGO,
seeing “strong renewed retail appetite,” in recent sessions, per the Vanda analysts. “This is another name that could continue to enjoy elevated flows” in the hunt for Nvidia rivals.
They also note, though, that there has been a “striking jump” in out-of-the-money option call turnover for Broadcom. A call option gives a trader the right to buy an asset for a specific price at a specific time, while put options work the opposite way.
“An unorderly unwind of those positions could fuel heightened volatility in the days ahead — something to watch out for,” cautions Vanda.
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