Advanced Micro Devices, Inc. (AMD) is having a rough Tuesday, and it's not because of anything the company did. Sometimes the market hands you a reality check, and today's comes courtesy of Google's growing ambitions in the AI chip business.
According to The Information, Alphabet Inc. (GOOG)'s Google is in serious talks with Meta Platforms, Inc. (META) and other cloud customers about potentially using Google's AI chips in data centers. That might not sound like earth-shattering news, but it's enough to send ripples through the semiconductor sector.
Google Turns Up the Heat
Here's the thing: Google is accelerating its push to compete more directly with Nvidia Corp. (NVDA) in the AI chip market. The company has been touting its tensor processing units, or TPUs, which are specifically designed to optimize performance and cost across AI training and inference workloads. These aren't new chips, but Google's willingness to rent them out more aggressively through Google Cloud is shifting the competitive landscape.
The report suggests Meta could start renting chips from Google Cloud as soon as next year. More significantly, Meta is apparently considering spending billions of dollars on Google AI chips in 2027 and beyond. That's real money and a potential validation of Google's hardware strategy.
Why AMD Is Getting Hit Hardest
Nvidia shares took a hit on the news, which makes sense given the direct competitive threat. But AMD? It's actually getting hammered worse than anyone else in the chip space. Investors are clearly worried that competition in the AI accelerator market is about to get even more intense. A potential shift from Meta toward Google's in-house AI chips signals that the market might be more fragmented than bulls hoped.
This comes at an awkward time for AMD. The stock has been on an impressive run in recent months after the company projected a 35% compound annual revenue growth rate over the next three to five years at a financial analyst day. That strong growth forecast hinges heavily on the company's AI data center business, which is exactly the market segment now facing increased competition.
Technical Picture Shows Short-Term Pain
AMD is currently trading approximately 9.3% below its 50-day moving average of $215.58, suggesting bearish short-term sentiment has taken hold. On the flip side, the stock remains approximately 31.3% above its 200-day moving average of $148.98, which means the longer-term bullish trend is still intact despite today's volatility.
The Relative Strength Index (RSI) sits at 43.21, putting the stock in neutral territory. It's neither overbought nor oversold at this point, which could leave room for a rebound if buying interest returns. The 50-day moving average may act as a key support level worth watching in the coming sessions.
AMD Price Action: At the time of writing, AMD shares are trading 9.11% lower at $195.47 according to data from Benzinga Pro.
