Summary:
- Advanced Micro Devices (NASDAQ:AMD) traded 3% higher on Tuesday morning, after a financial analyst identified it as one of the top investment ideas for next year.
- This might be correct however based on its market cycles, we believe that patience will pay off in building a position.
Cowen equity analyst Matthew Ramsay named AMD as one of his top ideas for 2019. He highlighted the change in semiconductor standards from 10 nanometer nodes to 7 nanometers. While this will benefit the sector as a whole, Ramsay expects AMD to be a first mover.
This of course came a day after Keybank said that the semiconductor sector was “staring into a black hole” due to a combination of weak demand and too much supply. The Semiconductor Sector ETF (SMH) is down 8% on the year.
In analyzing the market cycles for AMD, we think it is possible it has peaked for this cycle and is consolidating. We believe the stock will transition into a declining phase into February 2019, as this cycle closes. Cowen might be right, but we think patience will pay off before buying this one.
For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.