Sentiment Fissures In the Semiconductor Space Put Spotlight On Direxion's AMD-Focused Bull And Bear Funds

While being under the shadow of a major competitor isn't necessarily the strongest selling point, for semiconductor giant Advanced Micro Devices Inc. (NASDAQ:AMD), it certainly has its perks. Yes, the chipmaking industry tends to focus on artificial-intelligence darling Nvidia Corp (NASDAQ:NVDA), thanks to its world-class graphics processors and innovative tech architectures. Still, AMD is no slouch, delivering its own advanced solutions.

Moreover, investors looking for a discount may prefer the smaller enterprise. While the tech ecosystem has suffered significant volatility, NVDA still trades at over 20-times last year's sales. In contrast, AMD stock tips the revenue multiple scale six times over. By itself, it may not be the cheapest valuation. At the same time, one's semiconductor dollars may go further with Advanced Micro.

Another factor that may inspire confidence in AMD stock is the backing of the smart money. While analysts offering opinions on a publicly traded security are important, It's quite another thing when traders put real money on the line. Recently, Benzinga's options scanner identified several bullish transactions, most of them long-expiry call options.

Such trades are known as debit-based transactions – they start from a cash outflow position, with speculators betting that a specific outcome will materialize. The significance is that because of the debit paid, the target event must materialize prior to expiration for the option contract to be profitable. Because of this framework, the unusual options activity implies significant confidence in AMD stock.

Nevertheless, not every element favors the underlying chipmaker. Perhaps most worryingly, political dynamics threaten to unwind prior enthusiasm in the semiconductor space. In particular, U.S. government restrictions on AI chip exports to China along with several other regions cast a dark shadow over proceedings. While President Donald Trump has signaled a willingness to negotiate, tensions with Beijing remain high.

True, some contrarians are viewing the red ink in AMD stock and its ilk as a buying opportunity. At the same time, tariff exemptions and other negotiations can always break down, imposing uncertainty over the entire matter.

The Direxion ETFs: Still, with the ambiguity in the arena comes potential opportunity with financial service provider Direxion and its library of sector and company-focused exchange-traded funds. Earlier this year, the firm launched two new products. For the optimists, the Direxion Daily AMD Bull 2X Shares (NASDAQ:AMUU) delivers leveraged firepower. For pessimists, the Direxion Daily AMD Bear 1X Shares (NASDAQ:AMDD) could be a tempting proposition.

Primarily, the benefit of these specialized instruments is convenience. With the AMUU ETF seeking daily investment results of 200% of AMD stock – while the AMDD seeks 100% of the inverse performance of the namesake security – these vehicles offer an alternative to options trading. And unlike derivative contracts, ETF shares (or units) can be bought and sold like any other public security.

However, it's important to realize that Direxion leveraged and inverse funds are designed for speculation. As such, prospective participants should anticipate high volatility. Also, a position should not be held for longer than one day. Exposure beyond this recommended period may lead to value decay due to the daily effect of compounding volatility.

The AMUU ETF: Thanks to the chaotic environment that plagued the tech sector this year, the AMUU ETF started off on the backfoot, slipping 38% since its debut.

• Prior to the steep drop that materialized in April, the AMUU ETF attempted to establish a baseline of support at $18.50. Speculators may assume this to be a natural rebound target.
• Positive momentum appears to be building recently, with the bulls energized by the Trump administration's overtures toward China.

The AMDD ETF: On the other end of the equation, the AMDD ETF has benefited from the tech malaise but only slightly, up 6% since its debut.

• At its closing peak, the inverse AMD fund closed above the $34 level, demonstrating a sign of intent which quickly subsided.
• Presently, price discovery for AMDD is locked in a relatively sideways channel, with investors apparently waiting for additional catalysts.

Featured image by Chris from Pixabay.