Finance
This Chip Stock Is Absolutely Skyrocketing. And No, I’m Not Talking About Intel or Nvidia.
The biggest chip stocks have stolen the spotlight throughout the artificial intelligence (AI) boom. Nvidia is the obvious headliner, and Intel has staged a surprising recovery in recent months. But there’s another chip stock grabbing the market’s attention — especially recently.
I’m talking about Advanced Micro Devices (NASDAQ: AMD). Up about 112% year to date as of this writing and trading near a 52-week high after a recent post-earnings pop, AMD has gone from a laggard to one of 2026’s standout performers. Its stock has skyrocketed about 350% over the past 12 months as investors have piled in on optimism that the chipmaker is becoming a genuine second source for AI computing.
But has the stock’s valuation become too stretched?
The chipmaker’s stock has more than doubled already in 2026. Have shares become overvalued, or is it a buy?
The biggest chip stocks have stolen the spotlight throughout the artificial intelligence (AI) boom. Nvidia is the obvious headliner, and Intel has staged a surprising recovery in recent months. But there’s another chip stock grabbing the market’s attention — especially recently.
I’m talking about Advanced Micro Devices (AMD +11.44%). Up about 112% year to date as of this writing and trading near a 52-week high after a recent post-earnings pop, AMD has gone from a laggard to one of 2026’s standout performers. Its stock has skyrocketed about 350% over the past 12 months as investors have piled in on optimism that the chipmaker is becoming a genuine second source for AI computing.
But has the stock’s valuation become too stretched?
Image source: Getty Images.
An accelerating growth story
AMD’s first-quarter revenue rose 38% year over year to $10.3 billion — an acceleration from 34% growth in the fourth quarter of 2025. Non-GAAP (adjusted) earnings per share rose 43%. And free cash flow more than tripled year over year to a record $2.6 billion.
The story here, of course, is the data center segment. The unit, which sells AMD’s EPYC server CPUs and Instinct GPU accelerators, generated $5.8 billion in revenue — a 57% year-over-year jump that easily outpaced the 39% growth seen in the fourth quarter.
AMD chair and CEO Lisa Su explained on the company’s first-quarter earnings call what’s behind the surge.
“And what we’ve seen is all of the things that we believed in terms of Agentic AI and inferencing and all the CPU compute that is required, is just happening, and it’s happening at a much faster pace,” she said.
The numbers in other segments looked good, too. Client and gaming revenue rose 23%, and the embedded segment returned to growth with a 6% gain.
But it’s the data center — and specifically the AI-related portion — that’s increasingly defining the business.
Even more, management’s outlook calls for further acceleration. AMD guided for second-quarter revenue of about $11.2 billion at the midpoint, implying 46% year-over-year growth. On the earnings call, the company said it expects server CPU revenue alone to grow more than 70% year over year in Q2. And on the GPU side, AMD’s rack-scale Helios system — designed to compete with Nvidia’s most advanced offerings — will start shipping later this year, with Meta Platforms and OpenAI already signed up as customers.
In short, the underlying business is performing exceptionally well. The question is whether the stock’s current price reflects that reality.
Advanced Micro Devices
Today’s Change
(11.44%) $46.73
Current Price
$455.19
A demanding valuation
And that’s where I have a hard time getting comfortable.
As of this writing, AMD trades at about 150 times earnings. Even using the consensus analyst forecast for adjusted earnings per share over the next 12 months, the stock’s forward price-to-earnings ratio is about 42 — well ahead of Nvidia’s forward price-to-earnings ratio of about 26. For a chipmaker still trailing Nvidia in AI accelerator share and competing in cyclical end markets, that is a steep premium.
Sure, AMD’s growth profile has expanded. Su told investors during the earnings call that the company now sees the server CPU market growing more than 35% annually and reaching over $120 billion by 2030, up from a previous estimate of about 18% growth. That’s a meaningful upward revision and a real reason to think the data center story has further to run.
Still, valuations like this leave very little room for things to go wrong. AI chip demand remains concentrated in a small group of hyperscalers, and any pullback in their capital spending plans would land hard on AMD. And while the Helios rack system and the broader Instinct roadmap look promising, executing on them in volume is a different matter — particularly given how supply constrained the industry is.
There’s also a subtle margin risk worth watching. AMD’s adjusted gross margin was 55% in the first quarter, up 170 basis points year over year but down sequentially from 57% in the fourth quarter — though that earlier figure benefited from a roughly $360 million inventory reserve release. Strip that out, and the underlying trend is fine. But if the data center business tilts more heavily toward Instinct GPUs, which carry lower margins than EPYC server CPUs, the path to the profit ramp the valuation demands could get bumpy.
For investors who already own shares, rushing for the exits may not be the right move. The underlying business is thriving overall, and the structural shift toward more AI compute is undeniable. But for anyone considering putting new money to work today, I’d exercise caution.