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AMD Launches $6 Billion Buyback Amid AI Sector Jitters, Shares Jump

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Advanced Micro Devices (AMD) announced a $6 billion stock buyback plan on Wednesday, signaling confidence in its long-term strategy despite recent underperformance in the AI chip race. The announcement triggered a 6.4% rise in AMD shares, though the stock remains down over 6% year-to-date.

The new buyback adds to AMD’s existing authorization, bringing the total repurchase capacity to $10 billion. The move follows similar shareholder-pleasing strategies by major semiconductor rivals amid signs that the AI-driven chip boom may be plateauing.

“Our expanded share repurchase program reflects the Board’s confidence in AMD’s strategic direction, growth prospects, and ability to consistently generate strong free cash flow,” said CEO Lisa Su.

📉 Context: Market Pressure and AI Uncertainty

  • AMD shares are down 6% in 2025, compared to a <1% drop for the Philadelphia Semiconductor Index.

  • In contrast, rivals have surged:

    • Nvidia shares: ↑170% in 2024

    • Broadcom shares: Doubled in value

    • Qualcomm announced a $15B buyback in November

    • Broadcom initiated its own $10B repurchase in April

🤖 AI Competition Heats Up

Despite being seen as Nvidia’s top rival in AI computing, AMD faces mounting pressure:

  • Custom processors from hyperscalers threaten AMD’s general-purpose AI chips.

  • Concerns are emerging over AMD’s ability to keep pace with Nvidia’s entrenched ecosystem and rapid innovation cycles.

  • The $10 billion AI collaboration with Humain, announced just a day prior, indicates AMD’s intent to catch up through strategic alliances.

💰 Financial Snapshot

  • Free cash flow in Q1 2025: $727 million, down 33% YoY.

  • Cash & equivalents (as of March 29): $6.05 billion

  • Current liabilities: $7.70 billion

While the cash cushion and buyback authorization underscore AMD’s longer-term confidence, its short-term financial metrics highlight margin pressures and investment demands as it expands into custom AI and datacenter segments.

🧭 Strategic Implications

AMD’s buyback aims to:

  • Support share price amid volatility

  • Reinforce investor confidence in AMD’s AI ambitions

  • Signal resilience in an increasingly cutthroat chip sector

As investor sentiment wavers on AI-related tech, AMD’s aggressive buyback and global partnerships could be pivotal in defending market share and reaffirming its place in the AI arms race.

US Investors Shift Focus from Chipmakers to Software Amid AI Investment Evolution

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As the AI investment boom slows, U.S. chip stocks, which were the biggest beneficiaries of last year’s surge, are struggling in 2025. The spotlight has shifted to software companies, which are now seen as the next big play in AI. This shift comes as volatility driven by tariffs and concerns about diminishing demand, coupled with the rise of lower-cost AI models from China’s DeepSeek, have weighed on semiconductor shares.

The shift towards software is being viewed by several analysts as a long-term evolution of the AI investment landscape. According to David Russell, global head of market strategy at TradeStation, there’s been a noticeable “rotation” in investor focus, especially in light of the developments surrounding DeepSeek, the semiconductor outperformance of 2024, and the ongoing restrictions on U.S. chip exports to China. “Investors are looking for the next three-to-five-year stories… those companies that will benefit from what Nvidia has already done,” he added.

So far in 2025, the Philadelphia SE Semiconductor index has fallen 5.6%, with Nvidia, a major player in the industry, down nearly 13%. In contrast, several software companies have seen significant gains, with stocks like Atlassian, CrowdStrike Holdings, Palantir Technologies, and Cognizant rising between 7% and 19%. Exchange-traded funds (ETFs) tracking software companies have also seen substantial inflows. For example, the iShares Expanded Tech-Software Sector ETF has attracted over $1.87 billion in 2025, already surpassing last year’s total inflows.

Analysts argue that this shift is a natural progression for AI investments, as the primary use cases for AI technology are in software. Adam Turnquist, chief technical strategist at LPL Financial, emphasized that LPL prefers software stocks over semiconductors, a sentiment shared by Morgan Stanley. “The second stage of the innovation cycle is when people start utilizing products, and that’s when the software companies start getting paid… we’re now starting to see the ascendancy of the software part of the equation,” said Keith Weiss, equity analyst at Morgan Stanley.

This trend is driven by concerns about how long chip stocks can sustain their growth rates, with some investors rethinking the value of these stocks as software companies continue to improve their market position. The rise of DeepSeek’s more affordable chatbot, which competes with expensive direct-to-consumer AI products, is one factor contributing to a more cautious outlook on semiconductors. According to Brian Mulberry, portfolio manager at Zacks Investment Management, competition will likely reduce profits for these products, while enterprise software companies may find it easier to monetize new AI technology.

The shift toward software stocks is also influenced by the ongoing Sino-U.S. trade tensions, which have hurt semiconductor companies. Analysts have named companies such as Palantir, Microsoft, Oracle, and Salesforce as key players in the software space, though their performance has been mixed in 2025. Palantir, which offers AI software to businesses, has seen its stock rally, while Microsoft and Salesforce have struggled, down 4.9% and 12.6%, respectively.

Despite these fluctuations, some investors remain optimistic about the long-term prospects for software companies. While valuations for software giants like Microsoft and Oracle are still considered high—trading at 27 and 23 times forward earnings, respectively—investors like Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, argue that the focus should be on AI applications, not just chips. “We don’t need more Nvidia chips, we need applications,” she said.