Why AMD’s Momentum Can Endure Despite Recent Stock Surge

The plain, though somewhat striking, reality is that Advanced Micro Devices’ (AMD) share price has more than doubled this year. Yet despite such a substantial advance, the underlying investment backdrop remains unexpectedly rational. Experienced investors are well aware that steep rallies often invite equally steep corrections. However, that dynamic has not materialized for AMD—nor for the broader group of tech firms that have touted their AI capabilities in recent months.

At AMD, revenue growth is accelerating, profitability is expanding sharply, and Wall Street’s forward models anticipate substantial earnings growth next year driven by data-center AI and a strengthening PC/GPU cycle. Importantly, the valuation—while elevated—is not as excessive as the recent chart might imply. For these reasons, AMD still merits a constructive bullish outlook regardless of the uptick in valuation multiples.

Revenue Growth Continues to Accelerate

AMD’s revenue trajectory has strengthened meaningfully over the past several years, and this momentum carried into its most recent Q3 report, published last week. The company delivered a record $9.2 billion in revenue, up 36% year over year—the fastest pace since the June 2022 quarter, when the Xilinx acquisition lifted results roughly 70%.

Growth was broad-based: Data Center revenue reached an all-time high of $4.3 billion (+22% YoY), while Client and Gaming revenue surged 73% YoY to $4 billion. Management guided Q4 revenue to approximately $9.6 billion at the midpoint, notably excluding any potential MI308 shipments to China.

This acceleration is driven by several technical and strategic factors. The ramp of AI accelerators—particularly the Instinct MI350/MI355 series—coupled with maturing ROCm 7 software, is bolstering Data Center growth even before any contribution from China. In parallel, AMD is expanding its ecosystem through partnerships with OpenAI (a planned 6-gigawatt GPU deployment), Oracle’s OCI AI supercluster, and multiple cloud hyperscalers.

AMD’s fifth-generation EPYC “Turin” processors are also gaining traction, with deployments including AWS’s M8a instances. This further entrenches AMD’s position in the data-center CPU market. On the consumer side, Client revenue reached a record $2.8 billion (+46% YoY) driven by Ryzen demand, while Gaming revenue surged 181% on the strength of Radeon GPUs and semi-custom wins. Collectively, these developments mark one of the most dynamic growth phases in AMD’s history.

Margin Expansion Positions AMD as a Long-Term Compounder

A defining theme of the ongoing AI infrastructure cycle is that hyperscalers and semiconductor firms are delivering strong growth without proportional increases in cost. AMD is reflecting this pattern. In Q3, gross margin expanded to 52%, up two points year over year—and up an impressive 12 points sequentially following Q2’s inventory charge. Adjusted gross margin reached 54%, with Q4 expected to improve further to 54.5%. Additionally, operating margin rose to 14%, and free cash flow hit a record $1.53 billion.

This margin expansion is driven by a richer product mix, with higher contributions from EPYC CPUs and Instinct accelerators. Software also plays a key role: ROCm 7 and platform-level wins improve average selling prices and customer retention.

Meanwhile, the normalization of PC and gaming demand has helped strengthen Ryzen and Radeon utilization without relying on discount-driven promotions. Importantly, management’s higher margin outlook does not assume the resumption of China AI GPU sales, which effectively provides an upside lever should export-compliant pathways reopen.

If AI compute demand continues to scale—cloud capex is still trending upward through at least 2026—the favorable mix and software tailwinds are likely to persist. Even more cautious analyst coverage concedes that AMD’s beat-and-raise cadence reflects genuine computational momentum that appears durable.

A Premium Valuation at Risk of Compression

It is reasonable to question whether AMD’s doubling of its stock price has left little room for further upside. Yet valuation remains more measured than this year’s chart might suggest. At roughly $244 per share, AMD trades at ~63x this year’s expected EPS of $3.96. However, Wall Street projects $6.44 in EPS for next year—over 60% growth—implying a forward multiple closer to ~38x 2026 earnings. In other words, earnings growth can catch up quickly, allowing for natural multiple compression.

There are also realistic pathways for AMD to outperform current estimates. The AI accelerator ramp still appears underappreciated: the OpenAI agreement, involving a 6-gigawatt multi-year deployment beginning with MI450 in 2H26, is not fully reflected in near-term earnings models but meaningfully enhances AMD’s visibility. EPYC “Turin” is already in deployment at AWS (AMZN) and is poised to proliferate across cloud providers, typically resulting in cascading SKU additions and incremental share gains.

Additionally, Oracle (ORCL) intends to deploy a 50,000-GPU Instinct MI450 supercluster next year—a major anchor customer that could have a material impact on revenue. Layered on top of this, ROCm 7’s improvements in performance and enterprise readiness may accelerate adoption more than currently assumed.

Is AMD Stock a Buy, Sell, or Hold?

Analysts remain generally optimistic. Over the past three months, AMD has received 27 Buy ratings and 10 Hold ratings, with no Sell recommendations. The consensus rating stands at Moderate Buy, and the average price target of $278.09 suggests roughly 17% upside from current levels.

See more AMD analyst ratings

AMD’s Growth Engine is Just Warming Up

Despite a powerful run, AMD’s fundamental story remains strong. Revenue is accelerating, margins are expanding, and multiple catalysts—from Instinct accelerators and Turin EPYC to increasingly mature ROCm software and major cloud partnerships—are poised to support durable growth. With earnings likely to rise sharply, valuation can normalize even if the stock consolidates in the near term.

I remain constructive on AMD’s long-term trajectory, though investors should be prepared for elevated short-term volatility following such rapid appreciation.