Why AMD Stock Sank and Then Saw Recovery Momentum Today

Advanced Micro Devices (NASDAQ: AMD) stock has battled back from substantial sell-offs early this morning and is now in the green on the day's trading. The company's share price was up 0.3% as of 2:45 p.m. ET. The stock had been down as much as 5.2% near the session open.

At the time of this article's filing, the S&P 500 and Nasdaq Composite were up 0.2% and 0.5%, respectively. While tech-heavy indexes opened the day with another round of sell-offs, there has been recovery momentum as investors shopped for deals in the artificial intelligence (AI) space.

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Why did AMD stock start today with another round of sell-offs?

AI stocks have gotten hit hard in this week's trading, and today's session initially looked to be another day of substantial valuation pullbacks in the category. Investors have become increasingly pessimistic about the likelihood that the Federal Reserve will cut interest rates at its December meeting. A recent survey suggests that less than half of traders now expect a cut next month -- down from 95% of those surveyed in October.

AMD stock was also hit with sell-offs this morning in response to geopolitical risk factors. In response to the possibility that Japan could respond militarily if China were to invade Taiwan, a Chinese diplomat threatened that Japan's military would be crushed in a post this morning. AMD relies on Taiwan Semiconductor Manufacturing for the fabrication of its chip designs, and a move by China to seize control of Taiwan could have a devastating impact on chip supply chains.

Risk-tolerant investors are looking for bargains with top AI plays

On the heels of some big sell-offs, some investors have been buying into top AI names today. There's little doubt that AI is poised to be a massive long-term growth trend, and buying into leading players on pullbacks could deliver powerful returns for patient shareholders. While AMD stock could continue to see big volatility in the near term, the company's recent AI processing wins have some investors betting that the passage of time will show that recent valuation fears were overblown.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.