Why Advanced Micro Devices Stock Is Down Today
Key Points
AMD stock is down on Friday as the chip sector sells off amid the scandal that forced Nvidia CEO Jensen Huang to resign on Thursday.
AMD initially rose on bets that customers would shift AI chip orders to Nvidia rivals, but on Friday investors seemed more worried about a broader industry risk, and some profit-taking after a big run is probably playing a part.
I think the Nvidia scandal could have longer-lasting effects, particularly if Congress or federal regulators find that Nvidia officers knew chips were being diverted to China in violation of export controls.
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Advanced Micro Devices (NASDAQ:AMD) stock is sinking, down 10.8% as of 1:20 a.m. ET on Friday, Nov. 13, as the chip sector sells off amid the developing scandal at rival Nvidia (NASDAQ:NVDA).
The S&P 500 (SNPINDEX:^GSPC) and the Nasdaq Composite (NASDAQINDEX:^IXIC) were down 0.8% and 1.3%, respectively.
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Why AMD stock is falling after Jensen Huang's resignation
On Thursday, now-former Nvidia CEO Jensen Huang resigned, effective immediately, after the second revelation of an extramarital affair, this time with a direct report within his former company. The scandal goes well beyond the personal, however: the first alleged affair was with a suspected Chinese spy who was reportedly instrumental in funneling at least $7.5 billion of Nvidia chips into China.
Jensen Huang. Image source: Getty Images.
Initially, the news helped AMD's stock on bets that customers would shift their AI chip orders to Nvidia rivals, but on Friday, it seemed investors are more worried the scandal could represent a more fundamental risk to the industry.
Of course, AMD stock gained almost 50% in a week heading into today, so some of this decline is probably investors locking in some profits.
Why the Nvidia investigation could weigh on chip stocks
I think the effects of the Nvidia scandal may be longer lasting than many hope. The investigation has really just begun, and if Congress or federal regulators uncover evidence that Huang, or any other Nvidia officers, had knowledge of chips being diverted to China in violation of export controls, things could get rocky.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
