Advanced Micro Devices (NASDAQ: AMD)’s stock has been drifting in neutral, even as the broader AI chip boom accelerates.
Despite a solid earnings beat in Q1 and optimistic Q2 guidance, AMD stock is still down nearly 32% since May 2024, a troubling trend that reflects deeper concerns about its position in the AI infrastructure race.
Why AMD Isn’t Surging Like Nvidia
While demand for AI chips is exploding, most of the market’s attention, and money, is still flowing to Nvidia. Its H100 and B200 GPUs have become the gold standard for hyperscalers like Meta, Google, Amazon, and Microsoft.
Meanwhile, AMD’s MI300 chips are gaining traction but haven’t hit critical scale. The result? Even with increased AI-related capital expenditures from Big Tech, AMD hasn’t captured enough of that wave to lift its stock.
The Paradox: AI Spending Up, Chip Orders Down
There’s an odd disconnect in the market. Hyperscalers are increasing AI investment, but AI infrastructure integrators like Super Micro Computer (SMCI) have issued weak guidance, signaling delays in actual chip deployments.
That’s because Big Tech is now bypassing middlemen, buying chips directly from manufacturers like Nvidia and AMD. While that benefits AMD on paper, it hasn’t translated into the kind of blockbuster orders that drive stock surges.
Earnings Up, Expectations Down
AMD’s latest earnings report beat expectations across the board. Yet, analysts are lowering their long-term revenue and profit forecasts:
- Revenue growth for FY2026 and FY2027 trimmed slightly
- Earnings projections for FY2025 cut by 8%
These adjustments reflect skepticism about AMD’s ability to fully capitalize on AI demand, especially while it continues to lean on CPUs in a market rapidly shifting toward GPUs.
Valuation: De-Risked or Still Overpriced?
AMD currently trades at 25x forward earnings, well below its early-2024 peak of 63x. That’s the lowest multiple in three years, and on paper, it looks more attractive, if AMD can meet its EPS growth target of 21.3% for FY2025.
However, repeated downward revisions raise the question: Is that growth realistic?
Compared to Nvidia’s PEG ratio of 0.2x, AMD’s 0.8x PEG still looks expensive given its relative performance.
Technical Outlook: Waiting for a Breakout
For short-term traders, the technical chart tells a cautionary tale. The last major crossover, the 50-day moving average falling below the 200-day, was a bearish “Death Cross” back in October 2024. AMD has yet to recover that momentum.
Until a clear “Golden Cross” reappears, supported by volume, many investors are staying on the sidelines.
Analyst Sentiment: Bullish but Wary
Despite its challenges, 22 out of 31 analysts still rate AMD a Buy, with an average 12-month price target of $125.24, about 22% upside from current levels.
That optimism is rooted in AMD’s long-term AI relevance and its potential to eventually gain ground in the GPU market. But near-term conviction remains low.
Bottom Line
AMD stock is stuck. It has the potential, the product roadmap, and the demand environment, but it’s not yet translating those into investor confidence or market share.
Until AMD starts converting Big Tech enthusiasm into real revenue, Wall Street will continue to treat it as second fiddle to Nvidia.
