As Semis Soar, I’m Upping Price Targets for AMD, Intel

Several key semiconductor stocks simply soared higher in price on Monday as investors focused on the potential growth that could lie ahead for central processing unit, or CPU, designers specifically. Though these stocks have been hot for weeks now, the catalyst on Monday was the sudden popularity of Meta Platform’s (META) Muse AI agent. The underlying point that ran these stocks in a northerly direction on Monday was that AI agents can and must at times act autonomously. This creates expanded demand for inference or brains. That’s where CPUs come in.

Readers are well aware that I have written positive articles in recent weeks on both Advanced Micro Devices (AMD) and Intel (INTC), despite what had been, at times, a shaky summer for equities, for tech, and for the Philadelphia Semiconductor Index. Of course, Amazon (AMZN) has blocked the ability of Meta’s Muse to make purchases on its site, but once a cat is out of a bag, it rarely goes back in said bag on its own. The fact that Amazon saw a need to take such a step points toward a next AI boom that will focus on CPUs as much as graphics processing units, or GPUs, or any other kind of artificial thought creator.

On Monday, as Meta shares ran 11.4%, the shares of Arm Holdings (ARM), Intel and AMD ran 17.2%, 12.1% and 10% respectively. Late in the morning on Monday, AMD, which by virtue of that rally, reclaimed a “top five” weighting in the Sarge-folio (INTC is now No. 8), became the latest U.S. company to eclipse the $1 trillion mark in terms of market capitalization. Readers may recall that in early September, I gave you a $134 target price for INTC, up from $126, based on a $107 pivot. In late August, I reiterated my $700 target price for AMD based on a $509 pivot. Those two stocks closed on Monday at $615.52 and $121.78 respectively.

What Now?

In each case, these two stocks, on Monday, created new pivots, which in turn created the technical case for increased targets. No, that does not mean that these stocks will go straight past my old targets as they soar to victory. It does mean that based on the flow of capital and what I see in the charts, the upside potential for these shares, in my opinion, is even greater than I had previously thought, and I’m the guy who has been right on this pace and these names.

Charting Advanced Micro Devices

Readers will see that AMD screamed higher out of a small “double bottom” pattern of bullish reversal this past winter. The shares built a rising wedge pattern of bearish reversal while rallying into late June. The shares then found support at almost a precise 38.6% Fibonacci retracement of that entire rally in Late July.

AMD recaptured both its 21-day exponential moving average and 50-day simple moving average in early September. This forced both swing traders and professional managers to increase long-side exposure to the stock. The mini-golden cross experienced on Sept. 17 added some algorithmic punch to the upside movement. Though the gap created at the opening bell on Monday may need to be filled, the fact is that the high of June 30 has been taken out and now becomes our pivot. I believe that the expectation for the upside move that I gave readers on Aug. 25 if the above actually happened, was “explosive.” AMD is up 29.8% since I wrote that piece.

Looking at the indicators, both Relative Strength and the daily moving average convergence divergence are postured in overwhelmingly bullish fashion, though Relative Strength is starting to tap into a technically overbought area. (I did mention that unfilled gap.) That said, the histogram of the nine-day exponential moving average is now well above the zero-line while the 12-day EMA has overtaken and is pulling away from the 26-day EMA. It does not get much more bullish than that in terms of short to medium-term signal sending.

Target Price: $790 (new street wide high, up from $700)
Pivot: June High ($585)
Add: Down to 50-day SMA ($497)
Panic: Loss of late July Fib level

Charting Intel

Readers can see that through this past spring into very early July, the shares of INTC developed the large, quite visible rising wedge of bearish reversal that worked like a charm for traders more so than investors. The share price peaked on June 30. That’s important now. The selloff that ensued ran for most of the summer as the stock lost both it’s 21-day EMA and 50-day SMA.

What came out of that summer weakness ended up being a well-developed Inverse head and shoulders pattern of bullish reversal. That’s where our $107 pivot came from. The stock has now retaken and held both its 21-day EMA and 50-day SMA, bringing the swing crowd as well as the professionals back on board. We also see a mini-golden cross here as we did with AMD.

Looking at the same indicators here as used in the above chart, we see the same short to medium-term bullish signals. The rising volume reflects the increased capital flows coming from the direction of professional managers with access to institutional money.

Target Price: $178 (also a new street high, up from $134)
Pivot: June high ($142)
Add: Down to the 50-day SMA ($97)
Panic: Loss of the 200-day SMA ($78)

Marketplace

While I have had to adjust two target prices for two key holdings in my main portfolio (which is an awesome problem to have), traders need to understand that trading volumes, in the broad sense, were light on Monday in the broad sense. Yes, trading volume was heavy in our semiconductor names but was light elsewhere.

That could mean that with so much headline risk present this week, that traders and investors are proceeding with caution. Yes, there is some optimism around the summit with Pres. Trump and China’s Pres. Xi, but as we know, things could still go sideways. Yes, there is some optimism around the potential for peace in the Middle East, but as we know and probably expect, things could still go awry.

Yes, crude oil has rallied, but that run appears to have possibly paused. On the bright side, while U.S. Treasury debt securities have also rallied and paused, as I write, the rally looks to have been potentially renewed. That pushed U.S. equity index futures, which were trading lower, back toward the unchanged mark.

On Monday, the S&P 500 ran 1.49% while the Nasdaq Composite popped for a gain of 2.26% and the Nasdaq 100 soared 2.83%. The Philly Semiconductors supported the rally with an upward move of 4.29%, but not everyone was on board. The small to mid-cap indexes all rallied but to a far lesser degree, while the Dow Transports actually sold off.

Breadth

Seven of the 11 S&P sector SPDR ETFs closed out the Monday session in the red. Growth was in vogue as communication services (XLC) and tech (XLK) easily led the marketplace. Energy (XLE) was the big loser. There was no discernable out- or under-performance across cyclical and defensive sectors.

Winners beat losers at the NYSE by a mere five-to-four margin, but by a more comfortable three-to- two tally at the Nasdaq. Advancing volume took a 59.7% share of composite NYSE-listed trade, which is good but not great. That said, advancing volume did take a commanding 76.9% share of composite Nasdaq-listed trade. The catch? Monday was Yom Kippur and participation was the lightest for U.S. equities since earlier this month.

Economics (All Times Eastern)

08:15 – ADP Employment Change (Weekly): Last 16.25K.

08:55 – Redbook (Weekly): Last 8.5% y/y.

10:00 – Richmond Fed Manufacturing Index (Sep): Expecting 5, Last 4.

4:30 – API Oil Inventories (Weekly): Last +7.14M.

The Fed (All Times Eastern)

10:05 – Speaker: New York Fed Pres. John Williams.
10:20 – Speaker: Federal Reserve Vice Chair Philip Jefferson.
1:00 p.m. – Speaker: Richmond Fed Pres. Tom Barkin.

Today’s Earnings Highlights (Consensus EPS Expectations)

Before the Open: AZO (53.84)
After the Close: THO (.93), KBH (.88)
No significant quarterly earnings scheduled.

At the time of publication, Guilfoyle was long AMD, INTC equity