AMD Slaughters Short Sellers As Short Interest Drops by 69% In One Month!

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This is not investment advice. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

Chip designer Advanced Micro Devices, Inc (AMD) has dealt a heavy blow to investors betting against its share price. AMD has seen its market value rise meteorically over the past couple of years after rapidly gaining market share in the personal computing market due to a strong mix of product design and advanced manufacturing technologies. The exodus of short sellers from AMD's stock comes as the company prepares to expand its presence in the rapidly growing enterprise computing market following the successful completion earlier this year of its bid to acquire Xilinx, Inc. Short interest data for AMD as of mid-March shows a staggering decrease in the shares of the company that had been borrowed and sold on the market on hopes of a share price drop.

AMD Short Interest Falls By 66% From March 2021 Shows Latest Data

Data for AMD's short interest, which reveals the number of shares that have been sold for an anticipated price decrease shows that by mid-March, roughly 28 million shares had been sold short. AMD's latest figure for shares outstanding shows that the company has 1.63 billion outstanding shares, making the latest short interest figure represent roughly 1.7% of the public float. In comparison, chipmaking giant Intel Corporation's ~56 million short interest shares as of mid-March represent a meager 1% of its outstanding shares, and so do those of GPU designer NVIDIA Corporation.

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However, when the latest figure for AMD's short interest is compared to data from mid-February and mid-April 2021 the difference is stark. For the former, the short interest stood at a whopping 89 million shares and for the latter, it stood at a slightly lower 83 million. In percentage terms, the March data represents a huge 69% drop in just a month and an equally impressive drop of 66% since April 2021.

AMD's short interest is visible on the NASDAQ's website.

A cursory look at some of AMD's peers in the semiconductor industry reveals that this drop in short interest is exclusive to the company. For instance, Intel and NVIDIA's short interest dropped by 5% and 8% between mid-February and mid-March, respectively.

The short flee can best be described by a couple of actors. One of these is AMD's strong quarterly performance which has seen the company post consecutive revenue growth. For instance, the company's latest financial results posted in February saw it grow annual revenue for the fiscal year 2021 by a whopping 68%. It also marked the seventh consecutive quarter during which AMD posted growth.

Another is the successful completion of AMD's Xilinx acquisition. Xilinx is another American firm that is primarily responsible for selling field-programmable gate arrays (FPGAs). These products are primarily used in enterprise computing, a highly growing sector that has already contributed significantly to AMD's quarterly growth even before it brought Xilinx under its wing.

More recently, and after the short seller exodus, AMD announced another multi-billion dollar acquisition. This announcement came earlier this week when the company revealed that it plans to acquire data processing unit (DPU) and network interface card (NIC) maker Pensando for $1.9 billion.

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Commenting on the acquisition and its synergies with the Xilinx deal, Wedbush analyst Matt Bryson stated:

While we expect acquisition will prove expensive by any traditional metrics (e.g. P/S), we also believe that AMD arguably immediately becomes the leader in the emerging DPU market, particularly when Pensando's success is combined with Xilinx's inroads with its SmartNic products.

In an earlier note, Wedbush had commented that lackluster enterprise demand for graphics processing units (GPUs) also plaguing NVIDIA is worrying for AMD as well, but personal computing and server CPUs are performing well in the market, offsetting some of the GPU concerns.

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