Shares of Advanced Micro Devices (AMD) experienced a notable decline of 6.3% during the afternoon trading session, following reports indicating that South Korea’s SK Hynix is slowing its high-bandwidth memory (HBM) expansion efforts. This news sent ripples through the AI-chip sector, sparking concerns about potential cooling in AI demand.
At first glance, the situation appears to signal bearish sentiments for the AI market; however, analysts emphasize that the underlying motivations are related to profit margins rather than a decrease in demand. Specifically, SK Hynix is intentionally decelerating its HBM4 ramp-up to allocate more resources toward conventional DRAM, which has been experiencing shortages that have significantly boosted operating margins. According to reports, this margin gap is over 15 percentage points.
HBM memory plays a crucial role in the functionality of Nvidia’s AI accelerators. Consequently, any indication of a slowdown in HBM production tends to trigger panic among investors, who fear the overall AI market might be losing momentum. However, a more nuanced view reveals that all major memory manufacturers, including SK Hynix and Samsung, are effectively managing market tightness, with Samsung reporting a 146% increase in DRAM average selling prices in the first quarter and SK Hynix noting mid-60% increases.
Market sentiment was further complicated by a recent trend of profit-taking after significant stock surges. Micron has seen an impressive increase of approximately 300% since the beginning of the year, amid responses to the Federal Reserve’s more hawkish stance, which has led traders to anticipate an interest rate hike of 50 basis points by December under new Chair Kevin Warsh. This has raised concerns over the justifiability of debt-funded AI capital expenditures at such elevated valuations. As a result, while Micron witnessed an 11% drop, Nvidia, which is heavily focused on logic, dropped by a smaller margin of 3.6%. Analysts at Wedbush suggested that these price dips present a buying opportunity, given ongoing enterprise demand.
Closing the day at $518.74, AMD shares were 6% lower from the previous session. However, this volatility is not unusual for AMD, which has had 41 fluctuations exceeding 5% in the past year. The current movement suggests the market views these developments as significant yet not transformative for the company’s long-term outlook.
Just over a week ago, AMD’s stock gained 4.6% following an upgrade from Citi analyst Atif Malik, who changed his recommendation from Neutral to Buy, raising the price target from $460 to $575. Malik argues that the market has yet to fully appreciate AMD’s position as a secondary supplier in the GPU market, especially with AMD’s custom MI450 chips offering Meta Platforms a more cost-effective alternative to Nvidia’s products.
According to projections from Citi, AMD’s AI GPU revenue is anticipated to reach $33 billion in the near term, with expectations of growth to $50.8 billion thereafter. Since the start of the year, AMD’s stock has surged by 134%, trading close to its 52-week high of $542.52 recorded in June 2026. Investors who purchased $1,000 in AMD shares five years ago would now see their investment grow to approximately $6,228.
In other market news, there are whispers about a $21 AI application stock that has flown under Wall Street’s radar. While major attention is focused on leading AI developers, this lesser-known company is reportedly leveraging AI to generate substantial profits, indicating that the market may be missing out on significant opportunities. Investors are encouraged to explore this emerging opportunity before institutional interest potentially escalates.
