AMD stock: why is it taking a hit due to Broadcom's strong earnings?

Investors are bailing on Advanced Micro Devices Inc (NASDAQ: AMD) this morning after its AI peer Broadcom Inc (NASDAQ: AVGO) reported blockbuster earnings for its fiscal third quarter.

Broadcom’s record-breaking results and bullish guidance sent ripples across semiconductor sector – also triggering investor rotation away from AMD shares on concerns of heightened competitive pressure.

Despite today’s pullback, AMD stock remains a lucrative investment in 2025. At the time of writing, it’s up roughly 90% versus its year-to-date low in early April.

Why is AMD stock slipping on Friday morning?

AMD’s recent earnings showed solid performance, but lacked the explosive AI upside investors are now demanding.

With Broadcom’s results highlighting sustained demand and margin durability in AI infrastructure, traders are reassessing their exposure to AMD shares.

The company’s AI chip strategy, focused on its MI300 series, is in early deployment stages only and hasn’t yet demonstrated the same scale or customer traction as Broadcom’s XPUs.

Moreover, AVGO’s dominance in AI networking – through its Tomahawk switches and custom interconnects – adds another layer of differentiation.

These components are critical to scaling artificial intelligence workloads, and Broadcom’s near-monopoly in this segment is drawing capital away from AMD stock, whose exposure is more GPU-centric and increasingly challenged by Nvidia’s entrenched lead.

Broadcom looks more appropriately valued than AMD shares

Broadcom’s valuation, while elevated, is now seen as more justified given its growth trajectory.

The company trades at over 50x forward earnings, but its AI revenue growth and EBITDA margins of 67% support the premium.

AMD shares, by contrast, trade at a similarly high multiple without the same level of visibility or margin strength – especially amid the ongoing tariff uncertainty.

This disparity is prompting a reallocation of capital among institutional investors, who are favoring Broadcom’s diversified artificial intelligence exposure over AMD’s narrower GPU play.

The sentiment shift is also visible in options flow and retail chatter, with Advanced Micro Devices seeing increased bearish positioning following Broadcom’s earnings release.

Experts warn that unless AMD can accelerate its AI roadmap and secure marquee wins – it risks falling behind in a market increasingly driven by infrastructure-scale deployments.

Should you buy the dip in AMD stock today?

AVGO earnings have done more than impress – they’ve redefined investor expectations for what AI-driven growth should look like in semiconductors.

For AMD stock, the challenge is now twofold: defend its GPU turf against Nvidia, and counter Broadcom’s rising dominance in custom silicon and networking.

As capital flows toward Broadcom’s diversified AI ecosystem, AMD finds itself in a tougher spot – one where strong execution alone may not be enough to regain investor favor.

What’s also worth mentioning is that AVGO stock currently pays a small dividend as well, which AMD shares lack.

All in all, while Advanced Micro Devices may not be a poor investment per se, Broadcom’s earnings suggest there may be better ways to invest in AI in the back half of 2025.