Years in the Making, AMD’s Upside Movement Has Just Begun

Key Points

• Advanced Micro Devices' GPUs compete and complement NVIDIA's, setting the stage for both to proliferate.
• AMD is prime for inference, providing lower-cost, higher-memory products at scale.
• A single NVIDIA AI factory equates to numerous AMD AI inference centers.

It has been years in the making, but Advanced Micro Devices NASDAQ: AMD is set up to accelerate its revenue and sustain high-level growth for years, as it’s become the spokes to NVIDIA’s NASDAQ: NVDA hub. NVIDIA’s GPUs and AI infrastructure offer many advantages and will continue to drive AI. However, Advanced Micro Devices GPUs, specifically the MI450 line to be launched this year, also offer advantages that are altering the AI landscape.

NVIDIA has the first-mover advantage and positioning, as its stack was well-developed before the AI boom (actually caused it) and is best-suited for high-power, rapid model training and the proliferation of AI.

Disadvantages to NVIDIA's products include cost, operating cost, and utility across workloads, factors in which MI450s and Helios rack-scale systems excel. Advanced Micro Devices is well-positioned to benefit from NVIDIA’s dominance in AI training, as a single NVIDIA AI factory can produce enough AI models to support many AMD-based inference centers.

In this world, NVIDIA’s revenue growth can easily be outperformed, and there is evidence that the shift is happening. Hyperscalers, including Oracle NASDAQ: ORCL, Meta NASDAQ: META, OpenAI, Microsoft NASDAQ: MSFT, and Google NASDAQ: GOOGL, have either committed to Advanced Micro Devices' product, expecting deployments to begin in Q3 this year, or are preparing for it to happen, planning for smooth systems integrations. The common denominators are choice, cost, and purpose, as they blend systems into an integrated ecosystem capable of massive inference.

AMD Rockets Higher: Business Is Good for Training and Inference

Advanced Micro Devices' Q1 earnings results were a blowout, with revenue growth accelerating to 37.8% and outperforming the consensus estimate by more than 300 basis points. Strength was seen in both CPUs and GPUs, affirming the strength foreshadowed by Intel NASDAQ: INTC, driven by broad-based demand. The critical takeaway is that AMD is well-positioned not only to deliver GPUs but also to deliver much-needed CPUs to drive AI workloads across use cases. The Data Center segment led, up more than 50%, followed by a 23% increase in Client & Gaming, and a 6% gain in Embedded.

Margin was another area of strength. The company experienced margin pressures but managed them well, producing $1.5 billion in GAAP operating income, $2.5 billion in adjusted operating income, and $1.37 in adjusted earnings per share (EPS). Adjusted EPS was up 185% compared to the prior year, outpacing consensus by more than 600 basis points, and is expected to remain strong in the upcoming quarters.

The guidance was good, and that may be understating it. Typically cautious, Lisa Su says growth will accelerate meaningfully in the upcoming quarters, forecasting high-single-digit sequential growth in Q2, an acceleration to 46% year over year, and continued strength. MI450 and Helios will be a catalyst in the upcoming quarters, driving considerable strength, as she also says customer engagement exceeds company expectations. Looking ahead, Su also increased the long-term target, doubling her view of the CPU addressable market to $120 billion.

Advanced Micro Devices Valuation Is Way Out of Whack: Significant Upside Expected

It may take time, but Advanced Micro Devices' revenue is on track to approach or exceed NVIDIA’s within the next few years. The company’s forward-looking estimates are looking far too low, and even the consensus as of early May suggests considerable upside is available. Compared to NVIDIA, which trades at an approximate $4.75 trillion market cap, AMD’s $570 billion is a drop in the bucket, setting the stage for a 500% to 600% stock price increase over time.

The analyst response to the report has been robust, with numerous commentaries highlighting the strength and outlook, the agentic AI tailwind, and the upcoming MI450 launch. As it stands, MarketBeat tracks 41 analysts with ratings; they provide an 80% Buy-side bias, no analyst rates as a Sell, and the price target trend is positive. The price action is roughly aligned with the consensus figure, but high-end targets are favorable, with Rosenblatt setting a new high of $490. That high-end target represents 35% upside from the pre-release closing price and is unlikely to be the end of this trend.

The price action is mind-blowing, given the April advance. AMD’s price surged by 20% in after-hours and pre-opening trading, setting a fresh high near $420. The movement was driven in part by options action, so further volatility is expected.

Chasing prices higher is risky, as whipsaws and outsized movements are likely. Critical support is near the pre-opening close and may be retested before the upcoming earnings release. That's when the real catalyst will be unveiled, the Q3 guidance in which Helios rack-scale systems will be sold.