‘Don’t Get Swept Up,’ Says Top Investor About AMD Stock

Advanced Micro Devices (NASDAQ:AMD) stock has been on a remarkably strong run, surging to new highs and now up by 250% over the last 12 months. The past year has seen a big shift in sentiment around the chipmaker, which until recently was considered something of a poor man’s Nvidia, primarily due to its slow start in the AI accelerator space.

But as its products have improved, so has its standing among investors, who have watched the semi company nab some eye-catching deals (OpenAI, Meta, Oracle), signaling growing confidence in its AI chip lineup.

One top investor, known by the pseudonym JR Research, thinks its status as the underdog might be a plus here.

“Coming in behind in the AI race hasn’t been a bad thing for AMD,” the 5-star analyst said. “One could argue that with a smaller share to begin with, the potential for gains could be huge if they execute well.”

As such, JR thinks an argument could be made that it is Nvidia that still needs to demonstrate it deserves to maintain its leadership position for “as long as possible.” It’s therefore not surprising that Jensen Huang publicly declared at Nvidia’s Spring GTC event that the company leads in inference.

“Amid all this furor, I guess the whole point is to prove to us that Nvidia isn’t about to surrender training advantages or inferencing advantages to anybody looking in,” says JR.

That said, AMD appears to see an opportunity to grow its market share. As AI evolves toward agentic systems that require orchestration and planning, along with more local inference workloads, high-performance CPUs are becoming increasingly important, which plays directly to AMD’s strengths. From that perspective, bullish investors might argue that as market sentiment shifts toward AMD’s core capabilities, a higher valuation ahead of its Q1 earnings call on May 5 could be justified.

However, here is where the valuation issue enters the conversation. The gap with Nvidia has widened, with AMD now trading at around a 42x forward multiple, more than 70% higher than Nvidia’s, and that draws an incredulous “seriously?” remark from JR.

At the same time, competition is set to intensify. Hyperscalers like Amazon may eventually commercialize their in-house chips, while players such as Cerebras and Arm are also pushing into key parts of the market.

“Taken together, the competitive landscape is not just heating up but becoming exceptionally crowded,” JR noted, before adding, “I think this is where we need to maintain a good level of sanity and not let that ‘I’m going to miss out if I don’t buy now’ thought infiltrate all corners of our investing psyche.”

Accordingly, JR has now downgraded his AMD rating from Buy to Hold (i.e., Neutral). (To watch JR’s track record, click here)

Among the Street’s analysts, 8 join JR on the fence, although an additional 20 Buys all add up to a Moderate Buy consensus rating. However, the average price target stands at $287.33, indicating the shares are overvalued by 5%. (See AMD stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.