Inverse ETFs tied to Advanced Micro Devices Inc. (AMD) rallied sharply on Wednesday as investors rushed to bearish products following the chipmaker's post-earnings decline.
The Defiance Daily Target 2X Short AMD ETF (DAMD) jumped about 15%, making it one of the day's top-performing leveraged ETFs. The fund seeks to deliver 200% of the inverse daily performance of AMD shares.
Meanwhile, the Direxion Daily AMD Bear 1X Shares (AMDD) gained around 10%, tracking the opposite of AMD's daily return.
The gains came after AMD shares tumbled around 10%, demonstrating how inverse single-stock ETFs can quickly capitalize on sharp downside moves in high-beta technology stocks.
Strong Results, Weak Stock
AMD's decline came despite a solid earnings report. The chipmaker posted second-quarter revenue of $11.54 billion and adjusted earnings of $1.66 per share — both ahead of Wall Street estimates. The company's third-quarter revenue guidance of about $13 billion also topped expectations.
Investors, however, focused on the lack of a major near-term catalyst from AMD's upcoming Helios AI platform and a sharp increase in capital expenditures to $808 million, more than double the year-ago level.
The market priced in an even stronger AI outlook, analysts say. Others argue that the selloff was short-sighted since the Helios shipments will likely accelerate in the fourth quarter and through 2027. For instance, Bank of America analyst Vivek Arya advised to "ignore the quarterly noise," in a note to clients on Wednesday.
Volatility Creates Trading Opportunities
Wednesday's move highlights the growing role of single-stock inverse ETFs as tactical trading vehicles around major earnings events. With expectations for AI leaders running high, even earnings beats can trigger sharp reversals, creating outsized gains for bearish funds such as DAMD and AMDD.
The rally also serves as a reminder that these ETFs are designed to track daily inverse performance. They're tools primarily for short-term traders seeking to profit from sharp moves in individual stocks rather than long-term investors.
