The market's next test could come down to two stocks

• Options traders expect a 7% move in AMD with a bullish tilt, though the stock dropped 17% after its last earnings before rallying 75% in April
• Palantir options show stronger bullish sentiment with calls representing 62% of volume and 72% of premiums, with an expected 8% swing versus its 8.7% four-quarter average
• Major market indices hit new highs Friday with the VIX touching 16.4 (lowest since Feb. 3), creating favorable momentum for both hardware and software AI themes to rally together

Summary

The U.S. stock market faces a critical test as over 100 S&P 500 companies report first-quarter earnings, with semiconductor leader AMD and AI software provider Palantir Technologies emerging as key bellwethers for continued momentum.

Key Stocks and Performance

AMD reports Tuesday after the bell and is considered the most important for momentum traders. The stock has surged 270% over the past year—more than triple Nvidia's gains. Options traders anticipate a 7% move, showing a generally bullish tilt with call volumes and premiums significantly outpacing puts. However, sentiment remains cautious after AMD dropped 17% following its last earnings report before recovering with a 75% rally in April.

Palantir reports Monday after the bell, with options flows appearing more bullish. The stock is down 30% from all-time highs but still up 550% over two years. Call options represent 62% of total volume and 72% of premiums traded. Traders expect an 8% swing, slightly below the 8.7% four-quarter average. The company has rallied after five of its last seven earnings reports.

Market Context

Semiconductors remain the "heartbeat of the bull market" as AI infrastructure providers. The simultaneous reporting of AMD and Palantir presents an opportunity for both hardware and software themes to rally together after months of software underperformance.

Market momentum strongly favors bulls, with the S&P 500, Nasdaq 100, and Russell 2000 all reaching new highs Friday. The VIX touched 16.4—its lowest level since February 3—indicating low volatility expectations. Nvidia, the sector leader, reports May 20.