# AI backbone companies crushing earnings while chip stocks panic — buy the AMD and ASML dip

_AI-generated trading idea · LONG · AMD, ASML_

> Canonical page: https://commonquant.ai/research/for-you/ai-backbone-companies-crushing-earnings-while-chip-stocks-pa--3f4655cf-ba91-4d65-b5a3-ec61de83fc2e

The companies that actually make the foundational technology for AI are reporting massive, record-breaking profits. However, the broader stock market is panicking over short-term fears and dumping related chip stocks at a discount.

## Idea

The fundamental backbone of the AI boom is proving extremely profitable, with TSMC reporting a 77% profit jump and ASML raising its guidance. Yet, fear is causing a blind selloff in related chipmakers like AMD, Broadcom, and Intel. This panic contradicts strong analyst expectations for companies like AMD, creating a classic disconnect between temporary fear and actual business growth. Buying strong AI-related chip stocks during this baseless dip should yield a strong rebound once the market digests the positive earnings.

## Advanced Analysis

### Verdict: a strong story with nothing to buy yet

The thesis has real support: AMD's June 2026 quarter showed revenue of $11.5B up 12.5% sequentially with net income of $2.3B, up 66%, and ASML's fiscal 2025 delivered revenue of $32.7B, up 15.6%, with $11.1B in free cash flow — while TSMC's record profit and ASML's second guidance raise anchor the demand story, per the Reuters and Yahoo Finance reports cited. The strongest argument against is that none of this is in doubt, yet the setup cannot fire: AMD is up 14.0% over three days with RSI at 72.7 against entry thresholds of -5% and 40, and the compiled rules contain contradictory conditions (price both below and above the 20-day average) that produced zero entries across roughly 1,236 bars per name over 60 months — with no robust parameter fix established. Meanwhile the ownership data cuts the other way too: 13F filings for the quarter ended June 30, 2026 show about $153.2 million of net open-market selling across 17 AMD holders, which contests the idea that the fear is baseless. The verdict: wait — keep the watch levels on the screen, but there is no dip to buy today and no validated entry to buy it with. What flips it is either a genuine momentum reset (ROC at or below -5% with RSI at or below 40) or a completed rules fix plus confirmation that insider selling did not persist into the next filing window.

#### Conviction score breakdown

Composite score computed by the server from the applicable evidence-tier dimensions.

| Measure | Value |
| --- | ---: |
| Thesis support | 65/100 |
| Trade readiness | 20/100 |
| Risk quality | 45/100 |
| Trigger proximity | 10/100 |
| Fundamentals trend | 72/100 |
| Score | 42/100 |
| Composite Score | 42/100 |
| Evidence Tier | rules\_not\_triggered |

#### Decision scenarios

Bull, base, and bear cases synthesized from the cited evidence tier. Likelihoods are rounded evidence-weighted judgments, not statistically calibrated forecasts.

| Measure | Value |
| --- | ---: |
| Evidence Tier | rules\_not\_triggered |

### Trade now: no entry yet — AMD is rallying, not dipping

Do nothing today. The strategy is a dip-buying setup that needs a sharp short-term selloff before it will consider a long, and the market is doing the opposite. AMD closed at $520.22 with a 3-day rate of change of +14.0%, while the entry requires a 3-day move of at or below -5% — a gap of 19 percentage points. AMD's RSI (14) sits at 72.7, far above the 40 cap the entry demands, and the price is $38.75 above its 20-day exponential average rather than below it. ASML is closer to a pullback state but still not there: its close of $1,729.52 is only $3.23 below its 20-day average, yet its RSI of 50.2 is 10 points above the trigger and its 3-day move is +5.3% versus the -5% requirement.

One structural note: the entry rules as written ask the close to be both below and above the 20-day average in the same session — conditions that cannot coexist. The research author recognized this and requested a bounded optimization to relax the conflict while keeping the thesis, symbols, and risk rules intact; however, no robust parameter setup was established because the sensitivity run exceeded its time budget. The levels below therefore describe the setup as written and are a watch list, not a signal.

If and when a trigger forms, the exit framework is explicit: a fixed take profit at +4.9% from entry, a stop loss at -2.4%, and a thesis time stop after 45 days, with signal exits when RSI moves above 65 while price holds above the 20-day average. On those parameters, each prospective trade carries roughly 2-to-1 reward to risk. Position sizing is fixed-risk with a maximum of 20% of the book in one name. Waiting means checking these levels daily — not chasing a stock that is extended, and not treating a +14% three-day run as a discount.

#### AMD price and trigger map

Uses the idea timeframe and keeps price levels on the price axis.

| Measure | Value |
| --- | ---: |
| Ticker | AMD |
| Timeframe | 1d |

#### ASML price and trigger map

Uses the idea timeframe and keeps price levels on the price axis.

| Measure | Value |
| --- | ---: |
| Ticker | ASML |
| Timeframe | 1d |

### Why the bull case still has support

The core of this idea — that AI-infrastructure earnings strength is real while chip stock prices are selling off on fear — is genuinely supported by the numbers on both names. AMD's June 2026 quarter (ended June 27, 2026) is the strongest in its recent history on profitability: revenue of $11.54B, up 12.5% from the prior quarter, with net income of $2.30B (up 66% sequentially), a net margin that expanded from 13.5% to 19.9%, operating margin rising from 14.4% to 17.3%, and gross margin ticking up to 53.8%. Return on equity jumped from 2.1% to 3.4% in a single quarter. The latest full-year snapshot also shows AMD growing revenue 34.1% year over year — placing it in the 78th percentile of its Information Technology peers — with free cash flow in the 99th percentile. That is not a company whose business is deteriorating; it is one the market may be repricing on sentiment. ASML, the other leg of the pair, has the numbers of a franchise business rather than a cyclical: fiscal 2025 revenue of $32.7B, up 15.6% year over year, net income of $9.6B (up 27%), net margin of 29.4%, operating margin of 34.6%, and free cash flow of $11.1B — the 99.9th percentile of its Industrial-sector peers. Its gross margin (52.8%, 86th percentile) and ROE of 49.0% reflect a near-monopoly position. Management is visibly confident: per the Yahoo Finance report from July 15, 2026, ASML raised its 2026 guidance for the second time and beat Q2 earnings, and the Reuters piece from July 16 notes TSMC's record Q2 profit, up 77% and far above expectations. The thesis's premise that the supply chain's fundamentals are anchored is, on this evidence, correct. The dip itself is documented: the Yahoo Finance piece of July 16, 2026 reports Marvell falling 8% on AI capex slowdown fears, dragging down Broadcom, AMD, and Intel. The idea's setup explicitly buys AMD and ASML only when they have dropped more than 5% over three days while that earnings backdrop holds — a disciplined expression of the fear-versus-fundamentals disconnect. BofA's note (Yahoo Finance, July 14, 2026) adds that AMD looks set for a beat-and-raise quarter on surging AI server demand, which would directly catalyze the rebound the thesis is underwriting. Be clear about the evidence tier: the entry rules were evaluated on real daily bars over the last 60 months (about…

#### ASML Free cash flow

Free cash flow trend from CommonQuant fundamentals/XBRL data; +378.8% from first to latest point.

| Measure | Value |
| --- | ---: |
| 2007-12-31 | $521859000 |
| 2008-12-31 | $23209000 |
| 2009-12-31 | $-5765000 |
| 2010-12-31 | $811320000 |
| 2011-12-31 | $1769542000 |
| 2012-12-31 | $531600000 |
| 2013-12-31 | $843369000 |
| 2014-12-31 | $666926000 |
| 2015-12-31 | $1653700000 |
| 2016-12-31 | $1349600000 |
| 2017-12-31 | $1479400000 |
| 2018-12-31 | $2498700000 |
| Latest Value | $2498700000 |
| Change Pct | $378.8074939782585 |
| Ticker | ASML |
| Timeframe | reported periods |

#### ASML Revenue

Revenue trend from CommonQuant fundamentals/XBRL data; +190.4% from first to latest point.

| Measure | Value |
| --- | ---: |
| 2007-12-31 | $3768185000 |
| 2008-12-31 | $2953678000 |
| 2009-12-31 | $1596063000 |
| 2010-12-31 | $4507938000 |
| 2011-12-31 | $5651035000 |
| 2012-12-31 | $4731555000 |
| 2013-12-31 | $5245326000 |
| 2014-12-31 | $5856277000 |
| 2015-12-31 | $6287400000 |
| 2016-12-31 | $6875100000 |
| 2017-12-31 | $8962700000 |
| 2018-12-31 | $10944000000 |
| Latest Value | $10944000000 |
| Change Pct | $190.4316003593242 |
| Ticker | ASML |
| Timeframe | reported periods |

#### AMD sector percentile check

Ranks AMD against 791 companies in its sector using CommonQuant fundamentals.

| Measure | Value |
| --- | ---: |
| Free cash flow | \98.73577749683945th percentile |
| Operating margin | \87.11943793911007th percentile |
| Revenue growth (YoY) | \77.53807106598984th percentile |
| Rnd Intensity | \65.12301013024602th percentile |
| Ticker | AMD |
| Sector | Information Technology |
| Peer Count | 791 |

### Scores

- **Conviction score breakdown:** 42
- **Thesis support:** 65
- **Trade readiness:** 20
- **Risk quality:** 45
- **Trigger proximity:** 10
- **Fundamentals trend:** 72

### Watch items

- **AMD — ROC (3)**
- **AMD — RSI (14)**
- **AMD — Close vs EMA (20)**
- **ASML — ROC (3)**
- **ASML — RSI (14)**
- **AMD — Insider net open-market activity**
- **AMD — Next quarterly fundamentals (XBRL)**
- **ASML — Dividend event**

## Key details

- Symbols: AMD, ASML
- Timeframes: D1
- Tags: \#semiconductors, \#AI, \#dip-buying

## Community

- Upvotes: 0
- Views: 3
- Copies: 0
- Cosigns: 0

## News sources

- [Marvell Drops 8% as AI Capex Slowdown Fears Weigh on Chips; Broadcom, AMD, and Intel Slide](https://finance.yahoo.com/markets/stocks/articles/marvell-drops-8-ai-capex-161207073.html) — Yahoo Finance
- [ASML raises 2026 guidance second time, beats Q2 earnings](https://finance.yahoo.com/technology/articles/asml-raises-2026-guidance-second-114432617.html) — Yahoo Finance
- [AMD Looks Set for a Beat-and-Raise Quarter on Surging AI Server Demand, According to BofA](https://finance.yahoo.com/markets/stocks/articles/amd-looks-set-beat-raise-194637834.html) — Yahoo Finance
- [TSMC Q2 profit jumps 77% to record, far surpasses expectations - Reuters](https://news.google.com/rss/articles/CBMisgFBVV95cUxOYnh6a29MX0JydGlXMF83eUJWTTJrcEJZMTR1al8xTXVoTk1QTkduOTBCTjBFa09Qbmd5SjE3NGFiOHl3SHZ6RmFOM0ZoVmg3dFo2TUpiLWhqYnpJME1SdHhZZ2VwX3RuTmhwTHo1TzFjc0V5dDhaU3lELVdNcy1xM2tiZUZwSXdScFNrVmYtSFU2dFgwZUVwV2ZCQUZrZ0VUQUl5Zm1oQ0xfcktCWE5KVEp3?oc=5) — Reuters

## Related

- [AMD trade ideas](https://commonquant.ai/stocks/amd)
- [ASML trade ideas](https://commonquant.ai/stocks/asml)
- [Latest market news](https://commonquant.ai/news)

## About CommonQuant Research

Ideas and Advanced Analysis are generated with fresh, LLM-selected news headlines and grounded in SEC XBRL fundamentals and peer percentiles. Strategies built from these ideas are automatically backtested (12-month and 5-year, walk-forward tuned) and stress-tested before they can go live, then monitored against the news hourly while they run.