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AMD could see a 35% decline after massive run, trader warns

Ivana Freitas
VIDEO2:4202:42
Why this investing pro says buy AMD at $38

Advanced Micro Devices' rally is powering off.

The shares fell more than 2% on Thursday after Wells Fargo analysts downgraded AMD from overweight to equal weight. The firm said the stock could use a "breather" after its nearly 140% rally within 12 months.

Todd Gordon, managing director at Ascent Wealth Partners, said the stock had broken out from a yearslong consolidation.

"It first started trading in 1972, IPO'd on the NYSE in 1979. But what we've seen after that massive run-up was a consolidation that began in 2000. We just recently broken out of there," Gordon said Thursday on CNBC's "Trading Nation." 

But, after breaking out, Gordon worries that it could have run too far, too fast and be setting up for a pullback to $38.

"You have to decide, are you willing to ride it down to that point?" Gordon said.

A decline to $38 implies nearly 35% downside from current levels. AMD has not traded at that level since December.

Michael Binger, president of Gradient Investments, agreed with Gordon that a pause could be warranted here. During the same "Trading Nation" interview, Binger expressed his fears on the stock despite its growth.

"It's very rich right now, trades at about 50 times earnings this year, 40 times earnings next year. Now, you get a lot of growth for that but this is really a company that sells into the PC market mainly that doesn't grow that much." Binger said.

He said he's not only concerned the stock has "run too far, too fast" but is also fearful of competitors in the market.

"Intel has a lot of clout still in this market and they can stay price cutting. They can bring better product to market, that's what I worry about the most. … Would I buy it here today? No, I wouldn't, and I'd wait for that pullback." Binger said.

AMD will get the chance to showcase its next growth catalysts at its March 5 analyst day.

Disclosure: Ascent Wealth Partners owns AMD.

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