Advanced Micro Devices Inc. (AMD) stock has been surging all year, ending Monday’s trading session as the best performing stock in the S&P 500 Index and also costing shorts close to $3 billion in mark-to-market losses so far this year.
With shares surging on the heels of the launch of a new graphics card for the data center market over the weekend, short sellers, or those who are betting shares of the Sunnyvale, California chipmaker will decline, are facing steep losses. S3 Partners, the financial data analytics company, told MarketWatch that short sellers lost close to $177.5 million on Monday alone and were down more than $370 million earlier in the trading session when shares of AMD jumped close to 14%. Ihor Dusaniwsky, head of predictive analytics at S3 Partners, said investors have lost $2.67 billion so far this year betting shares of AMD will decline. (See more: AMD Shares Could Double in Coming Months.)
AMD Among the Top Money Losing Bets for Shorts
AMD is also now in third place as the worst short bet so far this year. Amazon.com Inc. (AMZN) is in the lead with shorts losing $3.75 billion in mark-to-market losses and Netflix Inc. (NFLX) shorts down $3.43 billion, Dusaniwsky told MarketWatch. Calling what’s going on with AMD a “stealthy short squeeze,” Dusaniwsky said shorts have been in this position where they are forced to cover their losing bets throughout the year. He said about 30% of the shorts have been driven out since April when short interest reached a high of 198.2 million shares, accounting for more than 20% of the outstanding shares and setting a record. The stock has gained a 165% since posting a 16-month low in April, with short positions dipping by 29.3 million shares or close to 18%. That happened in August, resulting in losses of $1.24 billion so far this month, reported MarketWatch. The short interest now stands at $3.32 billion, accounting for 16.2% of shares outstanding. Rival Nvidia Inc. (NVDA) short interest stands at $3.77 billion while Intel Corp. (INTC) short interest is at $3.56 billion, noted the report.
Goldman Gets Bullish
With AMD gaining market share from the likes of Intel, even Wall Street bears have been growing increasingly bullish on the prospects for the chipmaker. Earlier this month, Goldman Sachs upgraded its neutral rating on AMD to buy based on its ability to steal more business from Intel. It also raised its price target to $21 from $13.25. With the stock trading at $25.26, it has already passed Goldman Sachs new price target. (See more: Intel Needs To Prove It Can Beat AMD: Barclays.)
"We find it increasingly harder to argue our prior bear thesis—even following the recent stock price move—given Intel's struggles with 10nm process technology," Goldman Sachs analyst Toshiya Hari said in a note reported on by CNBC. "The delay in Intel’s new products will allow AMD to gain share in not only client (i.e. desktop PC, notebook PC) CPUs, but also in the lucrative server CPU market."