Advanced Micro Devices' Demand Spike Draws Intrigue For Direxion's AMD-Focused Bull And Bear Funds

Semiconductor specialist Advanced Micro Devices Inc. AMD easily beat the Monday morning blues with a gargantuan leap in the market. When the dust cleared, AMD stock was up nearly 9% over the prior session. Catapulting sentiment were unconfirmed rumors that the tech giant scored a "GPU win" with Amazon.com Inc.'s AMZN namesake cloud computing platform.

As a result, Piper Sandler analyst Harsh Kumar maintained an Overweight rating and raised AMD's price target to $140 (from $125). Last week, the expert highlighted product launches at the company's "Advancing AI" event. Most notably, the industry was abuzz regarding the Helios rack, a system comprising 72 advanced graphics processors for the purpose of powering data centers.

Still, with so much enthusiasm baked into AMD stock, investors may wonder if there are additional supporting narratives. Primarily, the bulls will likely point to the continued expansion of machine intelligence. Earlier this month, Meta Platforms Inc. META generated headlines on news that it is considering a multi-billion-dollar investment into Scale AI, which helps companies train AI models.

Per a Bloomberg report, the investment could top $10 billion in value, reflecting sustained growth in the digital automation realm. Subsequently, interest in AI may help boost GPU sales.

Another positive storyline again comes from Amazon. Just recently, the e-commerce juggernaut announced plans to invest the equivalent of approximately $13.02 billion through 2029 to expand its data center infrastructure across Australia. Again, such fundamental factors lend credence to the belief that Advanced Micro can benefit from increased demand for its data center products.

Still, every investment carries risks, and AMD stock is no exception. While Advanced Micro has made significant progress in the fabless semiconductor realm, it's an arena dominated by Nvidia Corp NVDA. It's also not particularly close. At the time of writing, Nvidia commands a market capitalization of $3.53 trillion. In contrast, AMD is looking at just under $205 billion.

Another point to consider is that the personal computer market is mature. In particular, consumer PC sales have slowed since the COVID-19 crisis, thus hurting Advanced Micro's traditional CPU and GPU business. It also doesn't help that the PC market only grew about 1.3% last year, reflecting wider challenges.

The Direxion ETFs: With competing narratives clashing for a popular enterprise, those interested in trading AMD stock may consider Direxion's leveraged and inverse exchange-traded funds. For the bulls, the Direxion Daily AMD Bull 2X Shares AMUU seeks the daily investment results of 200% of the performance of AMD stock. On the other end, the Direxion Daily AMD Bear 1X Shares AMDD seeks 100% of the inverse performance of the namesake equity.

Primarily, the relevance of these Direxion ETFs focuses on providing a convenient mechanism for speculation. Typically, those interested in leveraged opportunities or short positions must engage the options market. However, these derivative instruments can be incredibly complex. Direxion ETFs, on the other hand, can be bought and sold, much like any other publicly traded security, thus mitigating the learning curve.

Nevertheless, prospective participants should be cognizant of the risks. First, inverse and leveraged ETFs tend to be much more volatile than standard funds tracking benchmark indices. Also, the tracking of a single entity makes it subject to wild swings. Second, Direxion ETFs are designed for exposure lasting no longer than one day. Holding beyond the recommended period may expose traders to value decay due to the daily compounding effect.

The AMUU ETF: Making its public market debut in February of this year, the AMUU ETF is off to a decent start, gaining almost 8%.

Previously, AMUU was bouncing off the 20-day exponential moving average (EMA), which represented support. With Monday's big pop, the bull fund is firmly above this near-term gauge.
What's encouraging about Monday's jump of 17.5% was that it was also accompanied by a massive spike in volume.

The AMDD ETF: Also making its debut in February, the AMDD ETF isn't quite as fortunate, losing more than 22% of value.

Contrary to what was witnessed in the bullish counterpart, the AMDD ETF's 20-day EMA has acted as resistance.
Huge distributive volume accompanied Monday's selloff in AMDD. Moving forward, it likely must regain control of $20 to instill confidence.