With the market capitalization evaporating $236 billion, can AMD (AMD.US) earnings report end the bear market?

According to Woofun AI, Chaowei Semiconductor (AMD.US) is mired in a bear market caused by the overall sell-off of the artificial intelligence sector. Its stock price closed at $504 on Friday, a sharp retracement of 23.58% from its all-time high.

This decline directly caused the company's market capitalization to slide from a high of $1.06 trillion in October to $824 billion, evaporating more than $236 billion. In the face of the upcoming quarterly earnings report, the market focus is no longer limited to simple financial data, but is shifting to an in-depth examination of the company's business model, particularly whether its controversial 'circular investment' strategy can continue to be recognized by the capital market in the current high valuation environment.

This model, known as 'circular investment', where chip makers inject capital into large technology companies in exchange for their hardware procurement commitments, has become a core growth engine jointly adopted by AMD (AMD.US) and Nvidia (NVDA.US). The most notable recent example is AMD (AMD.US) investing $1 billion in Meta (META.US) (formerly Facebook). In exchange, Meta (META.US) is expected to use part of the capital to purchase AMD (AMD.US) CPUs, GPUs, and network equipment, and Meta (META.US) itself is already one of the largest buyers of AMD (AMD.US) products.

Additionally, AMD (AMD.US) has pledged to invest $5 billion in Anthropic, the world's largest AI research institution, and currently Anthropic is using AMD (AMD.US) solutions to train its AI models.

According to data compiled by Woofun AI, although such transactions can lock in long-term orders, investors have doubts about the financial transparency and actual profitability brought about by such related transactions. Coupled with Intel (INTC.US)'s worst single-day performance in history due to disappointing earnings reports, and NVDA.US (NVDA.US) stock price falling by double digits from a high point, the entire GPU industry is facing a severe crisis of trust.

In this context, analysts expect AMD (AMD.US) revenue for the September quarter to increase 41% year over year to reach $13 billion, with earnings per share rising from $1.20 in the same period last year to $1.94. This increase is mainly due to the explosion of GPU and CPU businesses in the AI sector.

However, based on the past performance of companies such as Micron Technology (MU.US), SanDisk (SNDK.US), and Samsung Electronics, most AI companies' stock prices fell after earnings reports were released, reflecting the market's sensitivity to high expectations and continuing concerns about the AI bubble.

Judging from the derivatives market and technical aspects, the downward pressure is still significant. The ratio of bearish/bullish open positions in the options market is only 1.03, indicating that there are more put options than call options, and the execution price of most put options is concentrated around 490 US dollars, which is only about 3% lower than the current stock price, which suggests that the market generally expects the stock price to fall further. Technical charts show that the AMD (AMD.US) stock price slowly fell from a high of $660 in October to the current $504. Although it briefly rebounded last week to hit $577, it then fell again. The stock price has now fallen below the Fibonacci retracement key support level of 23.6% and below the 50-day moving average, and the 'supertrend' indicator has also turned red. In the absence of strong fundamental reversal signals, the stock price is likely to continue to fall to the 50% retracement support level of $421, which means a 16.25% drop compared to the current price.

AMD's (AMD.US) earnings report is not only a test of its AI strategy execution, but also a reassessment of the entire chip industry's valuation logic. In a context where the circular investment model raises both regulatory and financial questions, even if the revenue data is in line with expectations, the market may choose to sell off due to concerns about long-term sustainability. This is another test of confidence facing the semiconductor sector following the Intel (INTC.US) earnings storm. Investors need to be wary of the risk of divergence between bright short-term data and long-term valuation restructuring.