AMD’s Q2 results exceeded revenue expectations but fell short in the data center segment tied to AI. The adjusted earnings per share were $0.48, just below the consensus of $0.49. AMD reported revenue of $7.69 billion, which surpassed the $7.40 billion estimate. For Q3, AMD estimates revenue of $8.7 billion, compared to the expected $8.31 billion, with a gross margin around 54%. However, this outlook does not factor in MI308 AI chip sales to China, as U.S. license approvals are still pending. This could lead to a $1.5 billion revenue loss this year due to U.S. export restrictions. Data center revenue grew by only 14% to $3.2 billion, which disappointed investors, especially compared to Nvidia’s stronger growth. CEO Lisa Su noted that reduced AI chip sales to China and the transition to the new MI350 series affected performance. Despite earlier successes this year, AMD shares fell over 5% in after-hours trading as the market reassessed its competitiveness in the AI and data center sectors ahead of Nvidia’s upcoming earnings. The market is reacting negatively to what it sees as weaknesses in AMD’s AI narrative, creating opportunities for derivative traders. The 5% drop in after-hours trading highlights how sensitive AMD’s stock is to its data center performance compared to its rivals. Implied volatility for AMD options has already exceeded 55%, indicating that the market anticipates significant price swings. The main takeaway is the unsatisfactory data center growth, especially with recent industry reports showing that Nvidia still holds over 85% of the AI accelerator market. The $1.5 billion revenue impact from China restrictions seems likely, particularly after the Commerce Department confirmed in July 2025 that it would not ease export rules. This situation makes buying put options or using bear put spreads a smart move to guard against further declines before Nvidia’s report. Nvidia’s upcoming earnings are now crucial for AMD’s stock price. Looking back at 2024, semiconductor stocks often moved 8-10% after a competitor’s earnings announcement. This history suggests that a straddle or strangle on AMD might effectively capitalize on potential volatility from Nvidia’s results. The growing performance gap between AMD and Nvidia also opens up a possible pairs trade. The options market shows this sentiment, with an increasing put-call skew in AMD’s contracts, indicating traders are paying more for downside protection. This reflects a broader market expectation of stagnation or further declines for AMD.

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