Expert warns this stock is signaling start of AI bubble burst

Finance

Expert warns this stock is signaling start of AI bubble burst

Amid lingering concerns about a possible artificial intelligence (AI) sector bubble, a trading expert has warned that Advanced Micro Devices (NASDAQ: AMD) may be flashing early warning signs.

The outlook by shared in a post on December 11, drew parallels between AMDs current stock behavior and its performance during the Dot-com era.

Notably, AMD closed the last session down more than 4%, trading at $210, while year to date the stock is up 74%.

AMD stock outlook

Using a monthly chart dating back to 1984, the analysis indicated that the stock is once again pressing against a multi-decade higher-highs trend line that has historically signaled major market tops.

In this case, AMD has recently posted a higher high within its six-year uptrend, which the analyst views as the technical peak of the current cycle. The subsequent rejection is expected to develop into a bearish leg that could extend toward $110.

The analysis also drew parallels between the Dot-com era and todays AI-driven rally, noting similarly symmetrical bullish and bearish price structures. In this view, the current fractal has already topped and is entering a corrective phase, potentially pulling the stock toward its 100-month moving average (MA), a key long-term support level.

Notably, during the previous technology sector cycle, a comparable correction was followed by a final parabolic surge that peaked just above the 1.618 Fibonacci extension before the bubble burst. If that pattern repeats, the AI cycle could still deliver a strong upside phase after the current correction runs its course.

For long-term investors, outlook suggests a much higher AI bubble peak later this decade, with the technical roadmap pointing to a potential move toward about $435 by around 2030 if historical symmetry holds.

AMD stock fundamentals

Overall, in recent sessions, AMD shares remain under pressure as investors reassess the AI trade, even as the companys fundamentals remain strong.

The stock has pulled back from recent highs amid broader volatility across semiconductor names, driven by concerns that expectations around AI spending may be running ahead of near-term results. The weakness follows a sharp rally into late November.

Notably, AMD is coming off a strong earnings run, posting year-over-year revenue growth above 30%, driven by accelerating data-center sales and a recovery in client computing. Operating margins have improved as higher-value AI and server products account for a larger share of revenue.

At the same time, risks persist, including U.S. export restrictions to China and intensifying competition from Nvidia in AI accelerators and Intel in CPUs.

Overall, AMDs fundamentals remain solid, but near-term stock performance will depend on whether earnings execution can justify elevated expectations in a volatile, AI-driven market.