As Advanced Micro Devices (AMD) and Super Micro Computer (SMCI) prepare to report their earnings on February 3, investors are eagerly waiting to see if these companies can pass the valuation stress test. Here's a breakdown of the key factors to consider:

AMD:

Strong momentum, with a ~17% year-to-date (YTD) increase in stock price

Consensus estimates: 1.32EPSon1.32EPSon9.67B revenue

Drivers of growth: data center AI, MI-series GPUs, and partnerships with OpenAI and Oracle

The big question: Will AMD's data center AI growth be strong enough to push the stock to new highs?

AMD's data center AI segment has been a significant contributor to its growth, and the company's partnerships with OpenAI and Oracle are expected to further boost its revenue. If AMD can deliver strong earnings and guidance, it's possible that the stock could reach new highs. However, investors will be closely watching the company's margins, as increased competition in the AI space could put pressure on pricing.

SMCI:

Tougher comparisons due to strong performance in previous quarters

Consensus estimates: 0.48EPSon0.48EPSon10.43B revenue

The big question: Does revenue mix matter more than near-term EPS pressure this quarter?

For SMCI, the revenue mix is crucial, as the company's growth is driven by a combination of factors, including server sales, storage, and networking products. While near-term EPS pressure is a concern, investors may be more focused on the company's ability to maintain a healthy revenue mix and drive long-term growth. If SMCI can demonstrate a strong revenue mix and provide positive guidance, it could help alleviate concerns about near-term EPS pressure.

Valuation Stress Test:

Both AMD and SMCI will face a valuation stress test as investors assess their earnings reports and guidance. With high expectations built into their stock prices, these companies will need to deliver strong results to justify their valuations. Any disappointment could lead to a sell-off, while a strong performance could propel their stocks to new highs.

In conclusion, AMD's data center AI growth and SMCI's revenue mix will be closely watched as these companies report their earnings. Investors will be looking for signs of strong growth, healthy margins, and positive guidance to justify their valuations. If both companies can deliver, it's possible that their stocks could reach new highs. However, if they disappoint, it could lead to a valuation reset.