AMD Faces Turbulence Amid Short-Seller Scrutiny and Governance Crisis

Advanced Micro Devices (AMD) shares fell by 7.82%.
Currently, companies such as Super Micro Computer Inc., Lumen Technologies, and Symbotic Inc. have faced short-selling attacks. Analysts believe that unlike leading AI stocks, shares like AMD's are more volatile and prone to short-seller pressure. The surge in AI-related stocks has led to substantial price increases, but not all companies have proven their resilience. As the tide recedes, it becomes clear which firms are genuinely strong.
Last month, AMD, Lumen, and Symbotic encountered short-seller scrutiny, which led to significant declines in their stock prices. AMD's market capitalization dropped from approximately $36 billion to about $26 billion by the week's end. This was triggered by a report from the well-known short-seller Hindenburg Research, which highlighted "apparent accounting issues" and other operational problems, thereby sparking a governance crisis within the company.
Ken Mahoney, CEO of Mahoney Asset Management, noted, "We distinguish between winners and losers." The reaction to last week's Nvidia earnings report shows how unstable the situation can get. Though Nvidia exceeded analyst expectations, its stock fell by 6.4%. This is attributed to investor expectations that Nvidia not only meets but also significantly beats forecasts.
AMD has recently faced instability, intensified by the rapid price appreciation of its shares, making it a prime target for short-sellers. Following Hindenburg's report, AMD responded that it needs more time to evaluate its internal financial controls.
Previously crowned as the "most bullish AI stock," AMD has encountered numerous recent setbacks, causing a decline in its stock price. First, its Q4 FY2024 revenue and profit fell short of analysts' expectations, causing shares to plummet. Concerns are growing over the long-term profitability of AI-optimized servers sold by AMD, Dell Technologies, and Hewlett Packard Enterprise. Failing to meet its earnings target in the most recent quarter has exacerbated these concerns.
Last week, AMD announced it would delay filing its annual financial report due to an internal control review by a special committee. This decision confirmed statements from earlier in the week that had already caused the stock to suffer its most significant one-day drop in nearly six years.
Despite these challenges, AMD reaffirmed that the annual financial report is not expected to significantly alter the previously announced performance metrics. Following the announcement, AMD's shares rose by about 2% in after-hours trading. Though down over 45% in the past 60 days, AMD's shares have still gained 54% year-to-date.
While recent performance has been weak, AMD's strong position in the rapidly expanding AI sector makes it a compelling long-term investment. The company's ongoing innovation and leadership in AI hardware back future growth prospects. However, investors should remain cautious about continued volatility and potential short-term hurdles.