Advanced Micro Devices (AMD) has been a disappointing stock over the past year, with declines accelerating in the last five months. Since May 2024, AMD has been down almost 32%. Amid growing concerns about demand for AI infrastructure chips, AMD has also struggled with a lack of competitiveness in absorbing that demand. Even after posting a beat across the board in its Q1 earnings last week and supplementing that with raised Q2 guidance, there are still no strong signs of a reversal in the bearish trend.
That said, while AMD is trading at its lowest multiples in the last three months and stands to benefit from the long-term AI growth trend, I would wait for a bullish consolidation before considering a long position. For now, I rate AMD as a Hold.
Paradoxical AI Infrastructure Demand Stays Elevated
The first five months of 2025 have been marked by growing uncertainty around demand for infrastructure chips, which has been a major factor behind chipmakers like AMD’s weak year-to-date performance. In fact, if we look at the AI chipmaker peloton, AMD is towards the back of the pack regarding price comparisons.
Take high-performance server builders like Super Micro Computer (SMCI), for example. Often seen as a proxy for data center demand—since SMCI buys large volumes of Nvidia’s (NVDA) A100/H100 GPUs and AMD’s EPYC CPUs—the company recently posted results with a weaker-than-expected outlook for the upcoming quarter, citing delays in AI server orders.
Paradoxically, end customers—hyperscalers like Meta (META), Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN)—didn’t flag any slowdown in AI infrastructure investment during this earnings season. In fact, their capex guidance for AI has actually been trending upward.
That’s the odd part: if AI investment is ramping up, companies like Super Micro, which literally build out this infrastructure, should be seeing a direct boost—and by extension, so should chipmakers like AMD. But that’s not showing up in SMCI’s forward guidance, which clashes with the broader narrative of AI growth.
What seems to be happening is a shift toward vertical integration by the hyperscalers. Big Tech companies are increasingly buying chips directly from manufacturers like Nvidia and AMD, and building AI systems in-house, bypassing integrators like SMCI and potentially leaving them on the sidelines.
Where AMD Stands in a Dynamic Chip Market
Despite the broader trend of hyperscaler integration, the market remains skeptical about infrastructure chipmakers, especially AMD. There are some plausible reasons for that.
First, even with persistent capex from hyperscalers, AMD is still struggling to capture that demand, as most of it continues to be funneled toward Nvidia GPUs, particularly the H100 and B200. While AMD is gaining some traction with its MI300 line, it still hasn’t secured a significant share of the AI accelerator market.
Advanced Micro Devices (AMD) revenue, earnings and profit margin history
That’s mainly because most of the current AI buildout is GPU-driven, rather than focused on traditional CPUs—a segment that AMD still relies on heavily, especially for standard server deployments. With hyperscalers zeroing in on NVIDIA’s GPU dominance, AMD is effectively left with pent-up demand, which it hasn’t been able to unlock.
As a result, AMD continues to lag behind NVIDIA in absorbing the surging demand for AI infrastructure. The market has started to dial back expectations for AMD’s growth, while also factoring in margin pressure stemming from the company’s loss of competitiveness in the high-end AI segment.
Following AMD’s Q1 results, analysts revised revenue growth forecasts downward, trimming expectations for 2026 and 2027 by 0.3% and 1%, respectively. But the bigger hit came on the bottom line, with earnings estimates cut by 8% for 2025 and 3% for 2026.
Is AMD’s Valuation More De-Risked Now?
Trading at 25x forward earnings, AMD is currently priced near the lowest levels seen in the last three years, having hit a low of 19x just a few weeks ago. That’s a significant drop from its peak multiple of 63x in Q1 of last year—a clear sign that some of the previous hype has been priced out.
This valuation only looks attractive if AMD manages to hit the current consensus EPS growth of 21.3% for FY2025. The issue is that recent earnings and ongoing concerns around AI demand have led to constant downward revisions, casting doubt on whether that growth target is realistic. So while the lower multiple suggests AMD could be de-risked enough to justify a bullish thesis, it also reflects investors’ hesitation to pay a premium for its long-term story.
Advanced Micro Devices (AMD) vs. S&P 500 (SPY)
That said, if we zoom out and look at AMD’s long-term EPS growth projections—around 28.7% over the next 3 to 5 years—the stock would be trading at a PEG ratio of 0.8x, which traditionally signals undervaluation. Still, it’s hard to ignore that Nvidia, AMD’s main competitor, trades at a PEG of just 0.2x, making it look even cheaper relative to growth.
For short-term traders looking to navigate AMD’s high volatility, which amounts to around 45% annually, a more tactical approach is key. I suggest a strategy based on moving average crossovers—specifically watching for a bullish signal when the 50-day MA crosses above the 200-day MA (the so-called Golden Cross). But, given AMD’s price swings, it’s crucial to only act on crossovers with a clear volume spike to confirm trend strength.
The chart below shows that the last major crossover occurred in October of last year, when the 50-day MA crossed below the 200-day—a “Death Cross” that triggered a sharp selloff in AMD’s stock.
Advanced Micro Devices (AMD) Technical Analysis
What is the Price Target for AMD Stock?
Overall, Wall Street is adamantly bullish on AMD stock. Of the 31 analysts covering the stock, 22 recommend a Buy, while another nine recommend a Hold. AMD’s average price target is $125.24, which suggests a potential upside of almost 22% from the latest share price over the coming year.
AMD recently posted a decent quarter, but it comes amid some paradoxes in the AI infrastructure chip market. The downward revisions to its long-term growth outlook highlight AMD’s ongoing struggle to capitalize fully on AI demand, as Nvidia continues to dominate the high-performance GPU segment. In other words, the demand exists—it’s just not flowing to AMD at scale.
While AMD’s valuation may now appear more de-risked than in years, I would still wait for more explicit confirmation of a bullish trend before initiating a long position.
