After AMD's Blowout Earnings Report, Is This AI Stock About to Enter the $1 Trillion Club?

Advanced Micro Devices (NASDAQ: AMD) has long played second fiddle to Nvidia in the artificial intelligence (AI) chip market. However, its latest quarterly report suggests that it is gradually becoming a key player in the AI infrastructure ecosystem.

AMD's data center graphics processing units (GPUs) are now experiencing strong customer demand. What's more, the company's server central processing unit (CPU) business is also taking off, driven by the growth in AI inference workloads. In fact, AMD is turning out to be one of the best ways to capitalize on the proliferation of AI, as it is well-positioned to benefit from the technology's adoption across multiple applications.

Let's take a closer look at AMD's first-quarter 2026 results (which were released on May 5) and check why this semiconductor stock is poised for more gains.

Image source: AMD.

AMD's growth rate is picking up thanks to AI

AMD's Q1 revenue increased 38% year over year to $10.25 billion, while adjusted earnings shot up 43% year over year to $1.37 per share. Analysts would have settled for $1.29 in earnings per share on revenue of $9.89 billion. However, a 57% jump in AMD's data center revenue helped it crush Wall Street's expectations.

AMD notes that it saw stronger-than-expected demand for both its Epyc server CPUs and Instinct GPUs in data centers. Importantly, demand for these chips is poised to grow. That's because Meta Platforms is going to deploy up to 6 gigawatts (GW) of AMD's Instinct data center GPUs. Even better, AMD says that Meta will be a "lead customer" for its sixth-generation Epyc server CPUs.

Meanwhile, major hyperscalers such as Amazon, Google, Microsoft, and Tencent have been increasing the number of cloud instances powered by AMD's Epyc server processors. AMD management noted on the earnings call that "inferencing and agentic AI are increasing the need for server CPU compute," which explains why the company now expects stronger growth in this segment.

AMD was expecting the server CPU market to grow at an annual rate of 18% over the next three to five years. However, it has nearly doubled that estimate and now sees the server CPU market growing at over 35% a year, generating $120 billion in annual revenue in 2030. Importantly, AMD has been gaining share in server CPUs in recent quarters, controlling 36% of this market in Q4 2025, up from 27% in the year-ago period.

This combination of improving market share and the rapid expansion of the server CPU market, driven by agentic AI and inference, will pave the way for stronger growth at AMD. The company sees a 70% year-over-year increase in server CPU revenue in the current quarter. Meanwhile, AMD notes that its data center GPU customers are on track to give it more business. That's why the company believes it can achieve annual growth of more than 80% in its data center AI business over the long run.

The improving end-market momentum explains why AMD's guidance points toward an acceleration in growth. The company expects a 46% year-over-year increase in revenue in the current quarter to $11.2 billion, which would be a nice improvement over its Q1 growth rate. AMD is expecting its non-GAAP gross margin to grow by a whopping 13 percentage points year over year in Q2 to 56%, suggesting its bottom-line jump will be even bigger.

Not surprisingly, consensus estimates are projecting AMD's earnings to jump 234% year over year in the current quarter to $1.61 per share. Analysts are expecting a 76% increase in AMD's earnings for 2026, up from $4.17 per share last year. However, it can do better than that owing to the expansion in its addressable market.

Data by YCharts

A trillion-dollar valuation isn't far away

AMD stock trades at a premium valuation following a remarkable 109% surge in 2026, as of this writing. Its trailing earnings multiple of 153 is well above the tech-focused Nasdaq Composite index's average of 42.7. However, the phenomenal improvement in AMD's earnings explains why its forward earnings multiple of 65 is significantly lower.

Also, AMD's red-hot earnings growth and sunny long-term prospects should help justify the premium that it trades at. Analysts anticipate solid earnings growth from the company, as shown in the previous chart.

Importantly, its sales growth is poised to pick up remarkably, with analysts expecting its top line to double in just two years.

Data by YCharts

Assuming AMD clocks $101 billion in revenue in 2028 and trades at even 10 times sales at that time, a significant discount to its current sales multiple of 20, it could easily become a trillion-dollar company. However, don't be surprised to see that milestone arriving much sooner than that, as AMD's accelerating growth should ideally be rewarded with a premium valuation.

AMD currently has a $731 billion market cap, suggesting this AI stock can deliver further gains for investors after rising impressively in 2026.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.