Key Takeaways
- AMD trades at 31.42X forward P/E, above the sector and peers like NVIDIA and Broadcom.
- AMD is up 10.2% YTD, helped by demand for EPYC processors and Instinct GPUs in data centers.
- AMD highlighted MI450/Helios momentum with Meta, OpenAI, HPE, Lenovo and Oracle Cloud plans.
Advanced Micro Devices (AMD – Free Report) shares are overvalued, as suggested by a Value Score of F. The AMD stock is trading at a forward 12-month price/earnings (P/E) of 31.42X compared with the broader Zacks Computer & Technology sector’s 23.43X.
AMD shares are trading at a premium compared with peers, including NVIDIA (NVDA – Free Report) and Broadcom (AVGO – Free Report) . Shares of NVIDIA and Broadcom are trading at a P/E multiple of 21.84 and 25.84, respectively.
AMD Stock’s Valuation
Image Source: Zacks Investment Research
Is AMD worth buying at current prices? Let’s dig deep to find out.
AMD Shares Outperform Sector
AMD shares have risen 10.2% year to date (YTD), outperforming the broader Zacks Computer and Technology sector’s drop 1.8%. Strong demand for data center EPYC processors and Instinct GPUs has been the key catalyst.
However, we believe the stock’s appreciation from this level is limited given intensifying competition from the likes of NVIDIA, Broadcom and Intel (INTC – Free Report) across domains, including AI-powered data-centers, high-performance computing and AI PCs. YTD, shares of NVIDIA have dropped 1.5% while Broadcom returned 2.5%. However, AMD has underperformed Intel, shares of which have jumped 67.3% YTD.
AMD Stock’s YTD Price Performance
Image Source: Zacks Investment Research
AMD’s modest guidance for the first-quarterfirst quarter of 2026 is expected to remain an overhang on the share price movement. The company expects revenues of $9.8 billion (+/-$300 million), which at the mid-point represents year-over-year growth of approximately 32% but a sequential decline of approximately 5%. The revenue guidance includes roughly $100 million of MI308 sales to China.
AMD expects year-over-year growth in revenues to be driven by Data Center, Client and Gaming segments and modest growth in the Embedded segment. However, sequential revenue decline is attributed to a seasonal decline in Client and Gaming, and the Embedded segment, partially offset by growth in the Data Center segment.
For the Gaming segment, AMD expects semi-custom SoC annual revenues to decline by a significant double-digit percentage in 2026. However, AMD’s gaming business is expected to improve in 2027 with the much-anticipated launch of Microsoft’s next-generation Xbox featuring an AMD semi-custom SoC.
AMD’s Earnings Estimate Revision Shows Steady Trend
The Zacks Consensus Estimate for first-quarter 2026 earnings is pegged at $1.29 per share, unchanged over the past 30 days, suggesting 32.3% growth from the figure reported in the year-ago quarter. The consensus estimates for second-quarter 2026 earnings also declined by a couple of cents to $1.44 per share over the past 30 days.
The consensus mark for 2026 earnings is pegged at $6.70 per share, unchanged over the past 30 days, suggesting 60.7% growth from 2025’s reported figure.
Expanding Portfolio to Boost AMD’s AI Data Center Footprint
Strong server CPU demand has been a key catalyst for AMD. As hyperscalers expand their infrastructure to meet growing demand for cloud services and AI, EPYC is gaining adoption. This trend bodes well for the next-gen Venice CPU. AMD is gaining traction in the data center AI business. The company delivered record Instinct GPU revenues in the fourth quarter of 2025, led by strong demand for MI 350 Series.
AMD’s data center AI business prospects are expected to accelerate with the upcoming MI450 series, which forms the crux of the 6-gigawatt (GWs) deal inked between AMD and Meta Platforms. The first deployment will see Meta Platforms’ use of custom MI450, along with 6th-generation EPYC CPUs, codenamed “Venice,” running on ROCm software and built on the AMD Helios rack-scale architecture.
Helios is gaining traction, as evident from AMD’s deals with OpenAI for deployment of 6-GWs of instinct GPUs, HPE’s plan to offer Helios racks with purpose-built HPE Juniper Ethernet switches and optimized software for high bandwidth scale-up networking, and Lenovo’s announced Helios racks offering. Oracle Cloud Infrastructure is set to launch the first publicly available AI supercluster using AMD’s Helios rack design, featuring Instinct MI450 GPUs, EPYC Venice CPUs and Pensando Vulcano networking.
The launch of the MI500 series, powered by AMD’s CDNA 6 architecture built on advanced 2-nanometer process technology and featuring high-speed HBM4E memory, is expected to drive further growth. AMD currently expects the data center total addressable market to hit $1 trillion by 2030, suggesting a CAGR of more than 40% from roughly $200 billion estimated in 2025. AMD expects its data center AI revenues to see a CAGR of more than 80% over the next 3-5 years. Overall, data center business revenues are expected to see an annual growth rate of more than 60% over the next three to five years.
Here’s Why AMD Stock is a Hold Now
AMD’s expanding portfolio and growing data center AI footprint are expected to improve its top-line growth over the long term. So, investors currently holding the stock should stay put.
However, AMD’s near-term prospects are limited given stiff competition. Stretched valuation is a concern for investors.
AMD currently has a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
