Piper Jaffray Pro: History Shows AMD Stock Could Fall Nearly 100%

If history repeats itself, Advanced Micro Devices, Inc. AMD investors should brace for a 96-percent crash in the stock, according to Craig Johnson.

What Happened

AMD is among the hottest performers in 2018, with shares up around 225 percent — but taking a look back at the stock's performance since 1996 shows a pattern that should concern investors, Johnson, Piper Jaffray's chief market technician, said on CNBC's "Trading Nation."

The stock surged 500 percent in the late 1990s before the stock "reset," he said. 

AMD's stock recovered for the most part from the late-1990s crash and soared nearly 1,300 percent from 2002 to 2006, only to tumble 96 percent, Johnson said. Today, the stock is up over 1,800 percent since September 2015, and while history doesn't necessarily repeat itself, it "does tend to rhyme," he said. 

"These kind of parabolic advances really only end one way — poorly," Johnson said. "From my perspective, I'm not chasing that stock here."

Gina Sanchez: 'Problematic' Valuation

AMD is a great company and akin to a "canary in the coal mine" given its recent ability to steal market share from industry titan Intel Corporation INTC, said Chantico Global CEO Gina Sanchez. But after an incredible surge in the stock, investors need to consider the lofty valuation, she said. 

AMD's stock is trading at more than 55 times forward earnings, which is a notable premium to the semiconductor group's 14 times multiple, she said. This makes AMD's stock is "pretty pricey" and difficult for investors to buy today with expectations to "get rewarded later." 

What's Next

AMD shares were down 1.95 percent at $31.80 at the time of publication Tuesday.

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