Advanced Micro Devices (AMD) will release its third-quarter earnings on Nov. 4. Heading into earnings, AMD stock has rallied 113.8% year to date and hit a record high. This rally in AMD stock reflects the market’s optimism about its positioning in the artificial intelligence (AI) and data center industries and its growing partnerships, which are boosting its growth prospects.
The latest spark came from a Reuters report revealing that International Business Machines (AMD) ran a crucial quantum computing error correction algorithm on AMD chips. This achievement reflects AMD’s technological depth and versatility, demonstrating that its processors are not confined to traditional computing.
Earlier, AMD stock got a considerable boost from a landmark partnership with OpenAI. This multibillion-dollar agreement could be transformative for AMD and its product roadmap. Per the deal, AMD will supply OpenAI with up to six gigawatts of Instinct GPUs, its high-performance accelerators designed for AI workloads, beginning in the second half of 2026. These next-generation MI450 chips will power OpenAI’s data centers, positioning AMD as a credible alternative to Nvidia (NVDA) in the increasingly competitive AI hardware landscape.
AMD has issued OpenAI a warrant for up to 160 million shares, vesting only as GPU deployment and stock price milestones are met. The final tranche unlocks if AMD’s share price reaches $600, aligning long-term incentives and limiting dilution risk for existing shareholders. In essence, AMD has built a performance-based partnership that rewards execution and value creation rather than speculation.
Complementing the OpenAI partnership, AMD expanded its long-standing partnership with Oracle (ORCL) earlier this month. Oracle Cloud Infrastructure (OCI) will become the launch partner for the first publicly available AI supercluster powered by AMD’s Instinct MI450 Series GPUs. The initial rollout will begin in the third quarter of 2026, with expansion planned for 2027 and beyond. This initiative builds upon their ongoing collaboration.
These developments position AMD to benefit from the growing investments in cloud and AI infrastructure. Its GPUs, EPYC CPUs, and networking technologies form an ecosystem designed to accelerate AI workloads while maintaining openness and security, which is a key differentiator in a market dominated by proprietary solutions.
www.barchart.com
After a weak second quarter, AMD appears poised for a powerful rebound in its AI data center business in Q3. The company’s AI revenue in Q2 declined year-over-year as U.S. export restrictions cut off sales of its MI308 accelerators to China. At the same time, AMD was in the midst of transitioning to its next-generation MI350 series, which temporarily dampened momentum.
Despite the brief lull, the outlook for AMD’s AI business remains bright. Management continues to project that its data center AI revenues could eventually reach tens of billions of dollars, reflecting the scale of opportunity ahead. Encouragingly, AMD’s MI300 and MI325 accelerators have already begun gaining meaningful traction, winning new deals across major cloud and enterprise customers. Moreover, it launched the Instinct MI350 series. The rollout of these next-generation chips is expected to drive a sharp rebound in AI-related revenue as customers ramp up deployments.
Adding to the optimism, AMD is progressing well with the development of its next-generation MI400 chips. Early indications suggest strong customer interest, signaling that the company is executing well on its product roadmap.
AMD’s strategy extends beyond hardware. Through targeted acquisitions and investments, the company has been building out its AI software ecosystem and service offerings, aiming to create a more comprehensive platform for enterprise and government clients. Another promising frontier is sovereign AI, where AMD is working on more than 40 projects worldwide.
Despite uncertainty on shipments to China, AMD’s top line is expected to show solid year-over-year growth in Q3, driven by accelerating adoption of its MI350 chips across multiple customers. In addition, strong demand for its EPYC server processors and Ryzen CPUs, both in cloud infrastructure and enterprise computing, will support its financials.
Analysts anticipate AMD will report earnings of $0.97 per share for Q3, a notable 27.6% increase compared to the same quarter last year.
Wall Street sentiment remains positive, with a “Strong Buy” consensus among analysts heading into the earnings announcement. However, investors should note that enthusiasm for AMD’s future has already been reflected in its stock price. After a strong rally, the shares now trade at a forward price-earnings ratio of roughly 74.8x, an elevated multiple that suggests high expectations are baked in. While AMD’s fundamentals justify optimism, its rich valuation leaves little room for disappointment if upcoming results or guidance fall short of market hopes.
Thus, investors should remain sidelined ahead of its Q3 earnings report.
www.barchart.com
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
