Advanced Micro Devices (AMD) Stock Plummeted 13% Last Week. Should You Buy the Dip Before Nov. 3?

Recent events suggest funding is getting harder to come by for some artificial intelligence (AI) companies. Two weeks ago, Australian data center company, Firmus, cancelled its initial public offering (IPO) due to a lack of investor demand. Moreover, financing costs are soaring for data center operators like CoreWeave. To top things off, Anthropic could face a $500 billion reduction to its expected valuation when it eventually goes public.

This is all bad news for the semiconductor industry, because it could reduce demand for data center chips and components. As a result, Advanced Micro Devices (NASDAQ: AMD) stock plunged by 13% last week alone, as investors started pricing in a potential slowdown in sales growth.

But AMD is scheduled to release its operating results for the third quarter of 2026 (ended Sept. 30) after the market closes on Nov. 3, and if the company puts some of the recent concerns to bed, its stock could stage a powerful recovery. So, should investors buy the recent dip ahead of the report?

Image source: The Motley Fool.

AMD faces explosive demand, but will it last?

AMD launched its first data center graphics processing unit (GPU) for AI workloads in 2023, and it was called the MI300X. It wasn't quite as powerful as Nvidia's (NASDAQ: NVDA) original H100 GPU, but customers like Oracle, Microsoft, and Meta Platforms deemed it a worthy alternative, particularly in the face of supply constraints across the industry.

AMD has since launched several new GPUs. The latest MI450 chips can be 15% more powerful and 30% more energy efficient than anything else on the market when paired with the company's Helios integrated data center rack. In other words, it appears AMD has officially closed the performance gap to Nvidia.

Anthropic and OpenAI are expected to be two of the largest buyers of MI450 GPUs (along with hyperscalers like Microsoft and Meta). But if Anthropic attracts a lower valuation than expected for its upcoming IPO, it might not raise as much money as it originally hoped, leaving it with less cash to buy chips.

OpenAI has postponed its IPO entirely, suggesting it doesn't feel confident about its ability to attract funding in the public markets. OpenAI has agreed to deploy 6 gigawatts' worth of computing capacity over the next few years using AMD's chips, starting with the MI450, and those plans could be at risk if the start-up doesn't receive significantly more funding.

Lisa Su's guidance on Nov. 3 will be key

AMD generated $21.8 billion in revenue during the first six months of 2026 (to June 27), a 44% increase from the year-ago period. The data center business alone accounted for $12.5 billion of that total, and it grew at a much faster pace of 81%.

AMD's guidance suggests data center revenue likely grew at a "very strong double-digit" pace yet again in the third quarter. But looking ahead, chief executive Lisa Su thinks data center sales will more than double in 2027. Moreover, in a series of remarks earlier this month, Su revealed plans to substantially increase GPU supply next year, suggesting AMD might be targeting a higher market share.

Investors will be looking for updated commentary from Su on Nov. 3. If she maintains or even increases her 2027 outlook, it might put some of the recent jitters across the AI industry to rest -- at least temporarily. On the flipside, AMD stock could plummet even further if she tempers her previous expectations.

AMD stock is not cheap heading into Nov. 3

AMD generated adjusted (non-GAAP) earnings of $5.76 per share over its last four reported quarters, placing its stock at a price-to-earnings (P/E) ratio of 91.8 (based on its closing stock price last Friday, Oct. 16). That means it's more than three-times as expensive as its closest rival, Nvidia, which has a P/E ratio of 27.1.

Therefore, AMD is basically priced for perfection heading into its Nov. 3 report, which doesn't seem appropriate given the uncertainty plaguing the AI industry. Even if we value its stock based on Wall Street's average 2027 earnings estimate of $15.76 per share (provided by Yahoo! Finance), its forward P/E ratio is still a hefty 33.5. In other words, if AMD stock did absolutely nothing until the end of next year, it would still be more expensive than Nvidia is today.

To make matters worse, Wall Street's earnings estimate might be too ambitious if funding conditions worsen for AI companies, because they might have to postpone or cancel some of their existing semiconductor orders.

As a result, while it's entirely possible AMD delivers another blockbuster quarterly report on Nov. 3, I'm not convinced its stock will rally given its elevated valuation. That's why I personally wouldn't buy it today.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.