From Underdog to AI Infrastructure Leader: Is AMD Poised for Growth in 2026?

TradingKey - By leveraging all the successful work of Dr. Lisa Su along with her leadership style, AMD (AMD) has changed from a niche provider of PC chipsets to one of the leading suppliers of technology needed for cloud computing to develop the infrastructure of A.I. globally.

Through investing in the development of highly capable processors for computer and other uses, AMD has focused on developing an architecture of chiplet-based processors while building a competitive advantage over Intel by working with TSMC to close the overall performance and cost gaps that exist between AMD and Intel, as well as establishing AMD as a direct competitor against Nvidia when it comes to developing AI-based accelerator products.

The success of AMD has shifted the center of AMD revenue growth to be driven by products for the data center and the related cloud services based on EPYC processors and MI300 Graphics Processing Units (GPUs). More so, the success of the data center business has created a shift in AMD's success by gaining market share in the market segments of providing cloud service solutions to major providers of AWS, Azure and GCP.

NVIDIA has been able to utilize its pricing power to its advantage as many companies look for alternatives to utilize in their business operations. Therefore, hyperscalers are looking for 2 ways to obtain NVIDIA alternatives (known as Hyperscalers), which include (but are not limited to) Xilinx and Pensando. Thus, AMD is able to provide support of the full AMD product stack (CPU, GPU, network and embedded systems) through one vendor that provides its customers with diversification and/or less cyclicality as well as improving the margin quality of the AMD product portfolio. 

AMD has positioned itself as an alternative to NVIDIA through its partnership with OpenAI, Microsoft, Meta, Oracle, and Sony. Due to the global trends of vendors seeking multiple suppliers for supply constraint mitigation, AMD's supply position continues to support this alternative position.

Each vendor has and will continue to experience 2 key risks (successful software execution through AMD's ROCm platform) and supply chain constraints remain. 

Therefore, the continued growth of AMD's data center in AMD's overall business, and the increased FCF generated by AMD, and AMD's overall share gains in the server segment create a multi-year growth opportunity for AMD, as a result of AI infrastructure growth.

AMD's Financial Performance and Positioning

As far as finances are concerned, AMD currently operates at a different level than it did previously. 

The larger data center component of its business is raising the quality of revenue and the company’s ability to generate cash flow, and through acquisitions, the company is no longer just a point supplier but a “platform supplier”. 

The partnership AMD has with OpenAI, Microsoft, Meta and Oracle, among other tech companies, is most beneficial as it gives AMD multiple channels to supply CPUs/GPU/Embedded solutions to customers and as such reinforces AMD’s position as a second source for AI compute as customers want multiple sources of supply for the same product. 

As the share gains AMD has made in the server business continue to build, the fourth quarter of 2025 will provide a solid foundation and several quarters of growth going forward. 

Software and ecosystem depth still play a role. The ROCm software will continue to need maturation to increase the number of developers who use it instead of relying on CUDA, but because of the increasing cadence of MI300X deployments, the planned MI400 ramp in the second half of 2026 and the large hyperscalers' public statements indicating interest in having more alternative suppliers, allow for an expanding total available market for AMD’s accelerators and CPUs. 

As said by CEO Lisa Su, “When evaluating AMD entering 2026 from an overall portfolio perspective, the company is experiencing significant momentum with the accelerating adoption of its high-performance EPYC and Ryzen CPUs and significant growth in the data center AI business."

Will AMD Stock Rise in 2026?

Although the AMD plan for 2026 looks good, there are still some risks with using AMD. The MI300 is growing well, while the MI400 should do well later this year. The amount of enterprise CPU share done by AMD has grown significantly due to all of the above.

Moreover, the partnership and diversification of the hyperscaler customers are numerous and will help to ensure that AMD continues to position itself in the large-scale AI cluster market.

Additionally, there has been an increase in the hedge fund ownership of AMD. There are currently 132 hedge funds that own shares of AMD, which is an increase of 17 hedge funds since the end of the fourth quarter of 2023. The hedge funds have been correlated with liquid and institutional ownership of AMD.

The market has reacted with a great deal of force to both positive and negative news, as evidenced by the recent downgrade of Northland, which saw the stock drop 4% from the high point in the intraday trading session following one of its best months in the past. As a result, it is imperative that guidance accuracy and execution are spot-on.

If ROCm continues to capture share, adequate but tight supply is maintained and hyperscalers continue their preference for multi-vendor strategies, then we will see AMD increasing further its market share and stock price. Conversely, should any of these parameters fail, the stock could see material drops after appearing to have increased rapidly in value.

Risks to Investing in AMD Stock

The high degree of expectation for AMD makes each quarter a vote of confidence for its Accelerated Processing Units (APUs), server market share and software maturity level. 

For developers to view AMD as low friction, the company needs to continue to catch up with its competitor (in this case) NVIDIA through the ROCm environment. Any negative developments in this area will slow down adoption, regardless of HW competitiveness. 

If supply chain issues were resolved, AMD would have the potential to take advantage of increased sales opportunities from competition with NVIDIA and a renewed focus from INTEL. Negative investor sentiment will contribute to volatility in the share price of AMD. We can see that an analyst who accurately predicted NVIDIA's share price in 2010 did not include AMD on his top 10 list. Some analysts are not bullish on every stock.

AMD has AI assets that are similarly positioned relative to both higher and lower than AMD, plus other entities that have been affected by previous policies that impact tariffs and inflation, leading to a reasonable belief that AMD is fairly valued relative to competitor stocks (i.e., ROCm).

Should You Buy AMD Now?

The decision of purchasing shares of AMD stock at this time will depend on personal tolerance towards risk (volatility) as well as one's belief in where the AI infrastructure cycle is headed. 

The bullish argument for investing in AMD stock is very clear; AMD is the only real, verifiable, large-scale, alternative source of AI accelerators as compared to the currently dominant company, Nvidia; as AMD's EPYC CPU product continues to grow significantly and capture additional market share; and finally, multiple partnerships with major hyperscalers and leading players (AI) are demonstrating that AMD has several years of known demand ahead.

In February, AMD produced several very strong results for Q4 FY2025, upgraded guidance on its data center division's revenues, and also showed actual, publicly available proof of successful installations of its products related to a partnership (6 gigawatts) with OpenAI.

The valuation of the stock shows a trailing P/E ratio of 109.00 and a forward P/E ratio of 42.37 as of April 22, which indicates to me that the stock has already been valued on a lot of the company's future success. Also, the price movement of the stock recently seems to have been driven not only by the fundamentals but also by upgrades and downgrades.

If you believe there will be strong future growth in capital expenditures related to AI and that businesses will continue to fund their dual-vendor acceleration strategies, then if there are any market changes that negatively impact the stock because of negative investor sentiment could give you the chance to buy low.

If you want protection from a possible market downturn in the future (after this past month's volatility), maybe looking at other AI-related stocks that are cheaper than AMD would help you reduce your portfolio's risk, depending on how you want to invest your money.

In any case, by using MI300X deployments, MI400 ramp activities, EPYC share gain areas, and ROCm development to support your investment rationale, you can stay true to your reasoning based on how well AMD will perform now and in the future.