AMD Bulls Make a Killing With 2X ETFs, But Friday’s 20% Rout Delivers a Reality Check

AMD stock surged 30.3% between November 6 and 12, culminating in a closing price of $585.30 on Thursday. This rally generated even greater returns for 2X leveraged ETFs tracking the semiconductor giant, with the GraniteShares 2x Long AMD Daily ETF (AMDL) experiencing a 66% increase over the same interval.

However, the momentum abruptly shifted on Friday, as AMD shares plummeted amid renewed volatility in artificial intelligence stocks. All four leveraged funds, AMDL, AMDG, AMUU, and AMDC, declined by approximately 19-20% intraday.

Three key factors fueled the remarkable AMD rally. First, the company reported record third-quarter results on November 3, with revenue surging 45% year-over-year to $13.4 billion, and Data Center revenue nearly doubling, climbing 97%. Second, Oppenheimer upgraded AMD to "Outperform" from "Perform" on November 9, setting a $600 price target.

Analyst Rick Schafer forecasted a 135% growth in Data Center revenue by 2027. Lastly, AMD announced its fifth-generation EPYC processors would power Google Cloud's new TPU 8tx infrastructure, solidifying its position in the rapidly expanding AI computing market.

The reversal on Friday underscores the inherent risks of leveraged single-stock ETFs. These funds aim to double AMD's daily percentage move, rather than twice its cumulative return over several days. Daily resetting and compounding can magnify gains during sustained rallies but also intensify losses when the underlying stock reverses.

As such, the sharp decline highlights the volatility risks faced by AMD-linked leveraged ETFs, especially in light of Nvidia's upcoming earnings report on November 17, which could further influence sentiment in the AI semiconductor sector.