There’s an old saying that the Chinese character for “crisis” can also be interpreted as “opportunity.” That’s often the case in the stock market, where a big selloff can lead investors to years of profits relatively quickly when the fears fade and prices rebound.
Right now, some tech stocks are getting hit hard on news that the US government is limiting chip exports to China. That can have an impact on a number of companies, but two look to be hit the hardest.
One of those chipmaker Advanced Micro Devices (AMD). AMD notes that the ban doesn’t appear to impact their current exports, yet shares sold off on the news anyway. Chances are AMD will trade higher in time as a result.
The chipmaker is down 22 percent over the past year. Yet shares now trade for about 21 times forward earnings, down from 42 times earnings at the start of 2022. Plus, with a low share price and low expectations, it’s clear the stock is more likely to surprise to the upside from here.
Action to take: Investors should look into gradually buying shares in the coming weeks, to take advantage of the current fearful markets. At present, shares don’t pay a dividend. But the company’s positioning in the chip space and growth potential – even without AI chip shipments to China – make it a big winner.
For traders, the March 2023 $100 calls, last going for about $6.50, can potentially drop down into the $5 range on any further weakness in shares in the coming weeks. Traders should look to buy low in the coming weeks, for the chance to flip the options for a mid-to-high double-digit return.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.