Advanced Micro Devices, Inc (AMD) reported second quarter earnings results yesterday which soundly beat top and bottom line estimates. The semiconductor product and device producer also forecast better than expected third quarter guidance with revenues expected to grow at a blistering 32% rate this year. AMD stock is up over 14% on the results in mid-day trading. AMD short interest is $3.53 billion; 42.23 million shares shorted; 4.70% of its float. AMD is the largest short in the Semiconductor sector.
Over the past month, short selling in the Semiconductor sector has increased substantially, up +7% or +$1.74 billion of new short selling over the last 30 days. But a closer look at the short selling shows a decided change of short sentiment in the sector. For the first three weeks of the last month we saw +$2.60 billion of new short selling while over the last week we saw $862 million of net short covering in the sector. 4 out of 5 stocks in the sector had net short covering over the last week, showing is there was a less bearish sentiment in the sector, especially ahead of 2nd quarter earnings reports.
After a surge of short selling in late July, AMD has seen short covering over the last week.
On the back of AMD’s earnings, the Semiconductor sector is up almost 3% for the day, led by AMD up +15% in mid-day trading. The sector is down -$800 million in mark-to-market losses in mid-day trading. AMD shorts make up over half those losses and are down -$496 million in mark-to-market losses today, bringing year-to-date mark-to-market losses to -$1.96 billion. These accumulated losses and today’s sudden shot to the gut may force a short squeeze in the stock and accelerate the recent trend of AMD short covering.
Based on year-to-date and today’s mark-to-market losses there is a good chance we see short covering in AMD, Nvidia (NVDA) and Taiwan Semiconductor (TSM) as some shorts get squeezed out of their positions. On the other side of the coin, we may see these three shorts building positions in Intel (INTC) with the cash coming from their short covering as INTC is down over -2% today when most of its sector brethren are rallying.
Looking at short selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities. Our Blacklight SaaS platform and Black APP provides an up to date view of short selling and short covering on an equity, sector, index, or country-wide basis allowing investors\traders to better manage their existing long and short positions.
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