What happened
Shares of semiconductor company Advanced Micro Devices (AMD 2.44%) soared 17.5% this week, according to data provided by S&P Global Market Intelligence, as investors turned their attention back to tech stocks.
Investors are hoping that trouble in the banking industry will mean that the Federal Reserve will slow its interest rate hikes and, in turn, tech stocks could return to better times. Positive comments from a tech analyst about the semiconductor industry likely contributed to AMD's share price gains this week as well.
So what
Investors focused their attention on the banking industry over the past week as Silicon Valley Bank failed, regulators shuttered Signature Bank, and First Republic Bank received $30 billion in deposits from other banks to help out its troubled business. If all of that weren't bad enough, Swiss Bank Credit Suisse said earlier this week that it's receiving a $50 billion lifeline from the Swiss National Bank.
So what does all of that banking news have to do with AMD's semiconductor business? For one, technology stocks have generally been shunned by investors over the past year as rising interest rates have made it more expensive for tech companies to borrow money to invest in new growth.
But with the recent banking troubles, some investors are now considering the possibility that the Federal Reserve will slow its pace of rate increases. That sentiment was buoyed earlier in the week when Goldman Sachs said that the Fed may even potentially pause rate increases.
Adding to AMD shareholders' optimism this week was the fact that prominent semiconductor analyst Christopher Rolland said that the consumer electronics sector has likely reached the bottom already.
"We believe the acute portion of the semiconductor downcycle for the handset, PC and consumer end markets has passed," Rolland said in an investor note.
That fueled a share price rise for AMD, along with other chip companies, earlier in the week.
Now what
While AMD investors are no doubt happy to see the company's share price rise quickly this week, they may want to brace for more volatility. The Federal Reserve will meet next week to make its next decision about interest rate increases and it's still very unclear what it will do.
If another rate hike occurs and is higher than some investors expect, it could cause technology stocks to give up some of the gains that they've made this week. All of this means that while AMD is up right now, there's simply too much uncertainty in the market at the moment to assume the stock will hold onto its recent gains.
