After dropping steadily in the second half of this year, short interest in chip designer Advanced Micro Devices, Inc (AMD) has begun to rise again. AMD’s stock has risen steadily over the last year, owing to the company’s consistent quarterly and annual revenue growth.
The NASDAQ exchange reported an increase in short interest even as AMD’s attempt to merge with field-programmable gate array (FPGA) company Xilinx appears to be on track to receive regulatory approval, and the value represents roughly 6% of AMD’s total outstanding shares.
According to the most recent statistics from NASDAQ, which tracks short interest in AMD’s stock, 71.6 million shares were sold short at the end of November. While this is a 20% decrease from the 89 million short interest shares at the end of July, it still shows that AMD’s short interest has been steadily increasing over the past few months.
Since the end of July, when short interest was at its highest for 2021, the amount had declined significantly by mid-August, dropping to 70 million shares after a reduction of 19 million shares. This downward trend persisted until the end of October when NASDAQ reported 62 million shares of short interest in the chip designer.
However, in November, the stock began to rise, and it has now increased by 16 percent to a value of 72 million dollars as of November’s end. This growth can be attributed in part to AMD’s stock price, which has dropped 8% since the first week of November but is still on the rise for 2021 after gaining $46 or nearly 50% since the beginning of the year when the stock closed at $92.30 on January 1st. Furthermore, short interest peaked at 75 million in mid-November before plummeting.
Insider trading activity for AMD’s stock shows that the company’s management has been selling shares throughout November. In November, the company’s vice president and chief accounting officer, Ms. Darla Smith, sold over 1,400 shares at $154 each, making her a tidy sum of $215,000. She was followed by AMD CEO Dr. Lisa Su, who exercised her options for 125,000 shares and sold them at $145 in an $18 million transaction during the second week of November.
Dr. Su was joined by many AMD executives, including Mr. Devinder Kumar, the company’s chief financial officer, who sold around 232,000 shares at prices ranging from $148 to $163. After exercising her options for the same number of shares for $17.7 million, Dr. Su sold 125,000 more shares at the end of December’s first week.
While an increase in short interest for a company is typically a negative sign indicating that more investors believe the stock will fall in value, in AMD’s case, it could also indicate that the Xilinx merger proposal has been resolved. If the deal is not completed and AMD’s shares fall during the open market, Xilinx investors can hedge their bets by taking short positions in AMD.
While Wedbush and Susquehanna both boosted AMD’s price objective to $165 and $175 in November, Erste Group downgraded the stock to Hold from Buy last week, stating that the stock is valued much higher than its peers and will only expand slightly shortly.
AMD’s next quarterly earnings are expected to be released in January, and the company is coming off a record central processing unit (CPU) market share of 24.6 percent in Q3 2021, the most since 2006. The chip designer has been able to generate significant earnings results because of improved product designs and cooperation with Taiwan Semiconductor Manufacturing Company (TSMC).
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