Advanced Micro Devices (AMD) has quickly become one of the market’s hottest stocks. Following news of a major partnership with OpenAI—which plans to purchase 6 GW of AMD’s next-generation MI450 GPUs—the stock soared roughly 35% since then.
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While many expected a post-rally pullback, AMD’s valuation has held firm. I remain Bullish, as the company is well-positioned in the booming AI accelerator market, which is projected to exceed $400 billion by 2027, leaving plenty of runway for continued growth despite its premium price tag.
Valuation Is a Re-Rating, Not a Bubble
AMD was trading at just $80 per share in April 2025, and now the price has ballooned to an eye-watering $250, and the market’s not done yet. Analysts immediately responded to the multi-billion-dollar OpenAI commitment by raising 2027 Data Center revenue projections for AMD by over 23%. The deal included warrants for OpenAI to own up to 10% of AMD — a masterstroke that financially motivates OpenAI to ensure AMD’s hardware and software are successful and highly optimized for its models.
Based on forward earnings, AMD is actually slightly undervalued. The company’s forward PEG ratio of 1.48 is 17.5% lower than the sector median. This shows that even with a high valuation relative to earnings, the company’s growth rate offsets the valuation premium. To spell this out more clearly: AMD’s forward P/E ratio is 58.5, which is 133% higher than the sector, but its forward diluted EPS growth rate of 33.3% is 183.9% higher than the sector.
At that valuation, AMD stock is an obvious Buy. The company does not need to “beat” Nvidia (NVDA), it only needs to capture 10–15% of the market to be an incredible long-term alpha generator. Current projections, which are rising, suggest that AMD is on track to capture at least 7.5% of the market, which is a significant jump from prior estimates of 3–4%. I’m hopeful for further upward revisions in the future.
It’s All About Data Centers
AMD’s Data Center segment is the new engine of the company, and following the OpenAI deal, consensus estimates project that this segment’s revenue will grow from $16 billion in 2025 to $22.9 billion in 2026 —a 43% jump in a single year.
AI accelerators are also extremely high-margin products. These sales will displace lower-margin segments, so AMD’s profitability is on track to fundamentally reset. This is why analysts forecast a 60% surge in EPS to $6.30 in 2026.
The question on shrewd investors’ minds now is “How much of the $400B AI market will AMD eventually capture?” The answer is that, given the overwhelming demand and the valuation from the industry’s most important customers, the path of least resistance for revenue and earnings is sharply up, whether that’s along with a 10%, 15%, or potentially even higher share of the market over a decade-long timeframe.
On Target to Hit $300 Per Share in 12 Months
Even if we just use the current consensus of $9 for December 2027 earnings and apply a conservative forward P/E ratio of 30, the stock price will be $270. That implies an upside of 17.5% in a base case. However, as the market for AI appears robust and enduring, we can reasonably expect a slightly higher forward P/E.
Indeed, AMD’s current forward P/E is 100, and the sector median is 33. So I think it’s logical to use a 35 ratio given AMD’s growing leadership position in a high-barrier-to-entry, high-margin field. A 35 forward P/E on $10 in Fiscal 2027 EPS leads to a stock price of $350 in 12 months. That will make the implied upside about 50% in a year in the perfect-execution bull case.
However, we should be aware of the main risks. If TSMC (TSM) can only support AMD with, let’s say, 3 GW of semiconductor packaging capacity, the 6 GW OpenAI deal may look better on paper than in reality due to supply chain bottleneck factors.
Also, OpenAI and Microsoft (MSFT) have thousands of the world’s best software engineers to optimize AMD’s chips and software platform (ROCm), but the broader enterprise market doesn’t; that might cap AMD’s growth outlook and total market share in the AI era. Nvidia, on the other hand, offers an out-of-the-box, stable, 15-year ecosystem called CUDA that is difficult to compete with.
Is AMD a Buy, Hold, or Sell?
On Wall Street, AMD carries a Moderate Buy consensus rating based on 29 Buys, 10 Holds, and zero Sells. The average AMD stock price target is $249.92, which indicates a marginal downside of less than 1% over the next 12 months.
AMD’s Hot Streak Isn’t Done Yet
Even after reaching new highs, AMD stock is still rearing to go. There are risks, but the upside potential is much more compelling. Wall Street might be somewhat neutral for now, but we only need a few more big catalysts for the consensus to re-rate even higher.
As things stand, AMD is clearly not overvalued; it’s just not a de facto value investment. However, for growth and momentum enthusiasts, AMD could be just the ticket to deliver 20%+ upside easily over the next 12 months.