I didn't chase AMD's 12-day winning streak—tonight Netflix told me this decision might be right.
I was watching two numbers today: one was AMD's 12-day winning streak, and the other was Netflix's -10%. One set a 20-year record by rising for 12 consecutive days, while the other plummeted 10% after the close on the same day. If you've been chasing the rally over the past week, looking at these two events together is far more important than looking at them separately.
First, let's talk about how AMD got here
AMD rose for 12 consecutive days, gaining 37%, adding $101 billion in market cap. From its low of $83 this year to $278—more than tripling.
This rally had two drivers. First, geopolitics—after the US-Iran ceasefire, the entire market went risk-on, and AMD, as a high-beta stock, was at the forefront. Second, TSMC's earnings—Q1 revenue grew 35% year-over-year, with full-year guidance exceeding 30% growth, essentially stamping approval for the entire chip industry's demand.
Sounds like all good news, right? But the RSI has reached 78. Historically, when AMD reaches this level, the probability of a pullback within a month is over 60%.
If you hold AMD or are considering chasing it, AMD's own Q1 earnings on May 5th is the watershed moment. Management previously guided for 32% revenue growth—whether that's validated or disproven will determine the substance of this 12-day rally.
Now, let's see what happened to Netflix tonight
Netflix's Q1 earnings actually beat—revenue of $12.25 billion (up 16% year-over-year), EPS of $1.23, far exceeding street expectations of $0.78. Just looking at this report card, it should have gone up.
But two things brought it down.
First, next quarter's revenue guidance was $12.57 billion, while market expectations were $12.63 billion. A difference of $60 million. Netflix is already up 15% this year, and the valuation headroom has been eaten up by prior gains.
Second, Netflix founder Reed Hastings announced he's leaving the company's board in June. He's been at Netflix for 29 years, from the early DVD-by-mail business to the current streaming giant. He says he's going into philanthropy and has also joined the board of AI company Anthropic. A founder choosing to leave at the market's peak—the timing itself is a signal.
What do these two things have to do with you?
Above S&P 7000, rallies need more good news to push higher, while a single imperfection is enough to trigger panic on the downside.
AMD pushed its winning streak to the extreme, but the chip sector as a whole didn't keep up—SMH (the semiconductor ETF) only rose 0.4% over the same period. Netflix beat earnings but missed guidance slightly and crashed 10%. The market is telling you: there's very little room for error at these highs.
If you're considering chasing the rally: Ask yourself one question—are you chasing an improvement in fundamentals, or are you afraid of missing out? If it's the latter, tonight's Netflix is your warning.
If you already hold AI/chip stocks: No need to rush to sell, but set a mental stop-loss level. Volatility will increase above 7000.
Brent crude at $98.6, Trump says the Iran conflict is about to end, talks may resume this weekend. If the peace talks succeed, the market continues to rise; if they fail, the foundation of this rebound is shaken. Chase the rally or wait? I choose to wait.
$AMD(AMD.US) $Netflix(NFLX.US)
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