Advanced Micro Devices (AMD) has emerged as the best-performing stock in the S&P 500 Index ($SPX) over the past month. Shares of the chipmaker have surged more than 56%, reaching new record highs. The rally comes as investor confidence in AMD’s role within the artificial intelligence (AI) market continues to strengthen. Moreover, the company’s recent partnerships and strategic deals have further driven optimism about its ability to compete with industry leaders and capture more market share.
AMD stock recently received a boost when International Business Machines (IBM) announced that it could run a quantum computing error correction algorithm on AMD chips. This news followed a multibillion-dollar partnership with OpenAI. The stock also received a significant boost after the company announced a multibillion-dollar partnership with OpenAI. This deal will reshape AMD’s product roadmap and accelerate its presence in the AI hardware space.
Adding to the momentum, AMD also deepened its long-standing relationship with Oracle (ORCL) in October. Oracle Cloud Infrastructure (OCI) will serve as the launch partner for the world’s first publicly available AI supercluster powered by AMD’s Instinct MI450 Series GPUs. The initial rollout is set for the third quarter of 2026, with broader expansion to follow in 2027 and beyond.
These strategic moves position AMD solidly to capitalize on the accelerating global investments in AI and cloud infrastructure. The company’s GPUs, EPYC CPUs, and networking technologies form a robust ecosystem designed to handle intensive AI workloads, which is likely to drive its financials and share price.
However, the stock’s meteoric rise has also elevated its valuation, raising concerns. While AMD’s prospects remain strong, other semiconductor players, such as Micron Technology (MU), are offering better value. Notably, Micron has outpaced AMD in terms of year-to-date performance, with its shares soaring roughly 177% compared to AMD’s 113% gain. Despite that impressive run, Micron’s valuation remains attractive relative to its earnings growth potential, offering a more compelling entry point for investors.
After a remarkable run, AMD stock now trades at a significantly higher forward price-earnings (P/E) ratio of about 81.1 times. Such a high multiple signals that investors are pricing in strong growth ahead. While AMD’s fundamentals remain solid and its growth story compelling, analysts expect the company’s earnings to rise by 68.2% in 2026. That growth outlook is strong, but when set against its premium valuation, it leaves little room for error.
