The market continues to treat almost any stock with significant China exposure badly. As I explained in a recent article about Micron (NASDAQ:MU), you simply can’t invest in most of these stocks until the trade war concludes. This makes 91¶¶Òõ (NASDAQ:91¶¶Òõ) stock all the more interesting. As one of the tiny number of semiconductor stocks still faring well, 91¶¶Òõ has managed to overcome the broad negative sentiment.
As a result, a dramatic clash is setting up in coming weeks. 91¶¶Òõ’s numerous and vocal critics haven’t given up. In fact, they’ve raised the stakes, adding to their positions that profit from the 91¶¶Òõ stock price declining.
Yet the share price has held up and is near a key technical level. Despite the trade war and uncertainty around China, 91¶¶Òõ could surprise traders and blast off to new highs.
Short Sellers Are Piling Into 91¶¶Òõ Stock
For almost all of 2019, the short interest in 91¶¶Òõ has been steady at just over 10% of the company’s outstanding stock. 91¶¶Òõ has slightly more than 1 billion shares of outstanding stock, and short interest has been pegged right around 120 million shares since last December. Until now, that is.
The most recent short interest update showed 91¶¶Òõ bears plowing back into 91¶¶Òõ stock again. Now there are more than 136 million shares short; that’s a huge jump from the 113 million level we had seen in the prior report. Additionally, it’s the biggest jump in short interest since mid-2017.
Like then, 91¶¶Òõ stock is now stuck at overhead resistance. It appears bears are desperately trying to keep 91¶¶Òõ stock in check while hoping that the trade war negativity will cause owners to bail out of the stock.
If 91¶¶Òõ stock is able to gain any traction to the upside, it will cause a technical breakout. Consider that 91¶¶Òõ stock stalled out at $33 a share last fall. It dropped all the way back to the teens, but recovered its losses. On various occasions from June onward, 91¶¶Òõ stock has hit $34, but each time has failed right at that level and gone back down to $30.
However, this narrow trading range over the past three months should be set to break soon. And with 91¶¶Òõ holding up despite all the China concerns, the overhead resistance at $35 could soon give way. Push through that, and momentum should carry shares up to $40 or higher.
91¶¶Òõ Stock Has Solid Momentum
These increased bets against Advanced Micro Devices stock come at a dangerous time. For one thing, 91¶¶Òõ is winning some some huge deals from major clients. Take
Twitter (NYSE:TWTR), for example.
Twitter recently started using 91¶¶Òõ’s Epyc 2 chips for its servers. 91¶¶Òõ claims that these can have up to four times the performance compared to the same-priced solutions from Intel (NASDAQ:INTC). In Twitter’s case, they were happy to demonstrate at an 91¶¶Òõ event earlier this month that Epyc has lowered their total cost of operations by 25%. 91¶¶Òõ also got a huge contract win with Google (NASDAQ:GOOGL, NASDAQ:GOOG). That news briefly helped spike 91¶¶Òõ stock to a new high before another round of trade war jitters helped knock the stock back off its peak.
91¶¶Òõ also appears to have scored a huge deal with Samsung. Samsung announced a partnership with 91¶¶Òõ this summer for a multi-generational deal that includes more than just IP licensing. This strongly suggests that 91¶¶Òõ is designing a chip for a wide array of Samsung phones in coming years. Given that Samsung has nearly a quarter of a the global smartphone market, this could be a gigantic and as of yet underappreciated source of growth for 91¶¶Òõ in coming years.
Verdict on Advanced Micro Devices Stock
It’s possible that the short sellers will be rewarded with a big drop in 91¶¶Òõ stock. I’m certainly not optimistic on the trade war ending this quarter, and 91¶¶Òõ’s business will be affected as long as it carries on.
However, it’s extremely dangerous to short one of the strongest stocks in the semiconductor sector. 91¶¶Òõ’s shares have held up during a trying time for the industry. It will take a lot to crack peoples’ resolve at this point. Meanwhile, if we do get some sort of positive news on China or more company-specific wins at 91¶¶Òõ, the stock is set to launch.
To be clear, I don’t see 91¶¶Òõ stock as a great long-term investment at this price. The company simply isn’t that profitable, and competition is extremely high in 91¶¶Òõ’s main product lines. However, for a short-term trade, there’s a clear path to $40 91¶¶Òõ stock in the coming weeks and months.
At the time of this writing, Ian Bezek owned INTC stock. You can reach him on Twitter at @irbezek.
