AMD Stock Price Forecast: AMD Plunges Over 7% Ahead of Earnings, Risks Further 10% Drop

TradingKey - AMD sees a massive wave of pre-earnings hedging sell-offs, triggering a sharp decline of over 7% in its stock price, with technicals facing the risk of a further 10% drop.

On November 2 Eastern Time, Advanced Micro Devices (AMD) plummeted 7.52%, falling below the $500 mark to close at $466.84. In overnight trading, AMD's stock price rose, narrowing its decline. However, against the backdrop of the U.S. midterm elections, AMD's stock price is more likely to continue facing downward pressure.

The sharp decline in AMD's stock price ahead of its earnings report is primarily due to spreading anxiety over capital expenditures and return on investment triggered by global tech giants. High full-year CapEx at Alphabet and Amazon has put severe pressure on free cash flow (FCF), leading Wall Street to question the return on investment (ROI) for AI infrastructure.

In addition, multinational institutions concentrated on reducing risk exposure ahead of the U.S. midterm election voting day on November 3, leading to collective valuation markdowns among high-beta semiconductor leaders. Over the past five days, the Philadelphia Semiconductor Index (SOX) dropped by over 10%, Alphabet fell by over 13% over the same period, and Nvidia fell by over 8%.

If AMD's Q4 earnings guidance confirms a PC market slowdown, or if the ramp-up schedule for its Helios architecture servers and Instinct MI450 AI chips is delayed, and gross margin guidance drops below 56%, its stock price could fall by more than 10% further to seek support at $420, the pullback low of the second half of this year.

AMD stock chart, Source: TradingView

If AMD's earnings exceed expectations, its stock price will be relatively resilient or might face profit-taking like Palantir, but it could gradually improve as the U.S. midterm election dust settles. Today (November 3) marks the voting day for the U.S. midterm elections, and pre-election hedging capital often experiences a relief rally driven by the "removal of uncertainty" once the voting results are clear, pushing these tech stocks to rebound.