While short selling data can be used to identify risks, it can also be used to spot buying opportunities. If a stock’s short interest is falling, it can indicate that the outlook for the security is improving.
In this report, we are going to highlight some bullish short selling activity at Advanced Micro Devices Inc (AMD:US). AMD is an American semiconductor company that specializes in chips for high-performance computing, artificial intelligence, the data center, and gaming. Founded in 1969 as a Silicon Valley start-up, the company has grown into a global semiconductor powerhouse, setting the standard for modern computing through major technological achievements, with many important industry firsts along the way. It is listed on the NASDAQ Global Select Market and currently has a market capitalization of $157.7 billion.
Advanced Micro Devices: Short Selling Data
Our short selling data reveals that in recent months, there has been a massive drop off in short selling activity at AMD.
If we go back to February 15, there were 79.6 million AMD shares on loan and utilization (a measure of demand from short sellers) was 10.5%. However, today, just 15 million AMD shares are on loan (representing less than 1% of the free float) and utilization has fallen to 0.19%.
This tells us that the short sellers have really backed off here. In other words, they no longer see significant downside risk.
Why Has AMD’s Short Interest Fallen?
As for why the short sellers have backed off here, it could be something to do with the fact that in mid-February, AMD announced that it had completed the acquisition of Xilinx. This acquisition creates a powerful business and AMD expects the acquisition to be accretive to non-GAAP margins, non-GAAP earnings per share, and free cash flow generation in the first year.
The reduction in short selling activity here could also be related to the company’s strong Q4 results. For Q4, AMD posted record quarterly revenue of $4.8 billion, up 49% year on year, and an operating margin of 25%, versus 18% in Q4 2020. On the back of these strong results, the group announced a new $8 billion share repurchase program.
As for the outlook, AMD advised that for the first quarter of 2022, it expects revenue to be approximately $5.0 billion, an increase of approximately 45% year over year and approximately 4% quarter over quarter. “We expect another year of significant growth in 2022 as we ramp our current portfolio and launch our next generation of PC, gaming and data center products,” said President and CEO Lisa Su.
Whether it’s the acquisition news or the good results here that have impacted sentiment, we see the drop-off in short interest as a positive development. It suggests that the outlook for AMD is less uncertain.