Advanced Micro Devices (AMD) has faced its share of volatility, with the stock down 23% over the past year. However, recent momentum suggests a potential turnaround is underway. Multiple growth catalysts are driving revenue higher, and it appears the market has yet to fully recognize this acceleration. Given these tailwinds, I’m bullish on AMD and believe the stock is well-positioned for a breakout toward its all-time highs around $200 per share.
AMD’s Data Center segment is emerging as the company’s growth engine—and for good reason. In Q1, the segment generated $3.7 billion in revenue, marking a 57% year-over-year increase, fueled by surging demand for its EPYC CPUs and Instinct GPUs. CEO Lisa Su pointed to deepening partnerships with major players like Microsoft (MSFT), Meta (META), and Oracle (ORCL), as hyperscalers increasingly rely on AMD’s chips to power AI workloads.
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This momentum isn’t just a one-off. Data center revenue nearly doubled in 2024 to $12.6 billion, and Q1’s results continue that trajectory. AMD is further reinforcing its position through strategic acquisitions, such as Untether AI and Brium, thereby expanding its capabilities in both AI hardware and software. The upcoming Instinct MI350 series is already generating buzz for its potential to rival Nvidia in AI infrastructure.
AMD CEO at AI keynote speech in Taipei on June 3, 2024.
Despite the cyclical nature of the semiconductor industry, AMD’s consistent data center growth, driven by rising AI demand and a strengthened ecosystem, suggests the company is well-positioned for a robust and sustained run.
AMD’s Client segment shouldn’t be overlooked—it’s staging an impressive comeback. In Q1, client revenue surged to $2.3 billion, up 68% year-over-year, driven by strong adoption of the new “Zen 5” Ryzen processors across both laptops and desktops. AMD’s Ryzen AI Max chips are at the forefront of this growth, powering over 50 AI-enabled laptop models expected to hit the market this year. But beyond the spike in sales, this signals AMD’s growing presence in the PC space, particularly in AI-driven devices like Microsoft’s Copilot+ PCs—a trend that could create lasting tailwinds.
AMD Ryzen 5 processor mounted in AM5 socket.
What’s particularly compelling is the shift in market perception. Once seen as the underdog, AMD is now steadily gaining ground on Intel by delivering processors that excel in both performance and power efficiency. The Client segment’s 68% jump in Q1 reflects this evolution—AMD is no longer catching up; it’s setting the pace. As AI becomes increasingly integrated into everyday computing, Ryzen chips are well-positioned to keep driving growth in this segment.
AMD’s strategic initiatives have played a key role in fueling its recent momentum. Notably, the acquisition of ZT Systems’ data center infrastructure business underscores the company’s long-term ambition to lead in AI hardware. CEO Lisa Su has projected that the AI accelerator market could reach $500 billion by 2028, and AMD is positioning itself to capture a significant share. The MI235X chip, purpose-built for AI inference, targets a segment Su believes will eventually outpace AI training in market size.
Collaborations are also strengthening AMD’s ecosystem. From IBM (IBM) deploying Instinct MI300X accelerators to Fujitsu (FJTSF) working with AMD on sustainable AI infrastructure, these alliances are embedding AMD’s technology into the fabric of global AI development. With double-digit revenue growth forecasted for the years ahead, AMD’s strategic investments are increasingly looking like long-term value drivers.
At first glance, AMD’s current valuation—trading at 31x this year’s consensus EPS of roughly $4—may seem steep. However, a closer look reveals a compelling growth story. Analysts project a 44% jump in EPS by 2026, reaching an estimated $5.71. That would bring the forward P/E down to a much more attractive 22x, a reasonable price for a company set to benefit from a robust, multi-year AI tailwind.
Adding to the bullish case, AMD’s gross margin climbed to 54% in Q1 and continues to improve as its high-margin data center segment scales. This margin expansion sets the stage for stronger profitability ahead, reinforcing the stock’s long-term value.
Wall Street maintains a fairly bullish view of AMD stock. AMD features a Moderate Buy consensus rating based on 22 Buy and 10 Hold ratings issued over the past three months. Notably, not a single analyst is bearish on AMD stock. AMD’s average price target of $127.93 implies a modest 5% upside potential over the next 12 months, which, in my view, suggests that Wall Street is still underestimating the stock.
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AMD appears to be at a pivotal inflection point. Its Data Center and Client segments are gaining momentum, recent acquisitions are reinforcing its position in the AI space, and the current valuation suggests the market has yet to fully price in its growth potential. While challenges like export restrictions to China and weakness in the gaming segment remain, they’re far outweighed by AMD’s aggressive expansion into AI.
Given the accelerating demand for advanced computing power, I believe AMD is well-positioned not just for a recovery but for a breakout to new highs. The conditions for a sustained rally are falling into place—and that breakout may be closer than many expect.
