One of the most recent markets trends has seen Advanced Micro Devices, Inc. (AMD) stocks rise up with a very healthy rate. There is also a good reason behind this upshoot but there’s always some subtext attached with the market regarding the tech world. When it comes to tech stocks, there are a number of aspects that have the potential to cause movement in the market. News tends to be one of the biggest reasons for the movement. The news behind this movement has been the latest announcement by Google regarding their idea to develop a cloud-based gaming service called Stadia.
Apart from being a potentially game-changing idea, the news had a major impact on AMD’s stocks. The reason for this is that along with the idea was revealed the fact that Stadia will use a custom AMD chip. It is supposed to handle the heavy-duty graphics processing from the cloud, rather than offloading that work onto a graphics card that would normally be installed on a console. Gamers will be able to stream complex games to their screens without needing consoles or high-powered graphics chips in their computers. All of this should give you a fair idea as to why the AMD stocks may seem like a mouth-watering deal right now, keeping in mind the state it may achieve in the future.
Market analysts are giving various reasons for this jump value. The biggest contributor to this rise has been a short squeeze. In a short squeeze, short sellers panic and buy to cover their positions. Okay, before all of this seems alien gibberish to you and you end up clicking the back button, let us understand the basics of what we need to know. The short players of a market are the people who earn money when they foresee the value of some sort of an asset going down in the near future market forces (if you’re getting some Showtime’s ‘Billions’, Bobby Axelrod vibes then yes that’s what we are talking about).
Short squeeze, however, is their method of saving themselves of the unseen losses. So how does that work in this scenario? Let’s take the example of a yoghurt brand X. Suppose you’ve heard that it’s getting more expensive in the future, so like a wise rational person you go ahead and purchase it. But until then every person has had the same exact thought and due to the demand-supply gap, the prices start shooting up today! That is exactly how short squeezing has contributed to AMD’s stocks. Analysts have closely monitored this situation and have been giving their constant views as to how this is going to pan out further.
But then why is the word ‘risky’ being used? Well, it follows by universal law that whatever goes up has to come down, and in the ever-changing market scenario, it translates to ‘the higher the climb, the bigger the fall’. Analysts have said with confidence that this short squeeze, however long it may last, has to come to a halt and when that happens the stocks could experience a plummet. This has been followed by constant word of advice to the investors to not follow the herd on this one for not only the reasons concerned with the market but also those in connection to the tech reason itself. The possible overestimation of the importance of AMD in this upcoming project, which may not turn out to be a success in itself is the biggest of these reasons.
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