Could AMD's $100 Billion AI Ambition Make It the Next Great Chip Stock?

Advanced Micro Devices (NASDAQ: AMD) recently held its first analyst day in three years, and its management laid out some pretty ambitious targets. The chipmaker now sees its total addressable market -- which includes graphic processing units (GPUs), central processing units (CPUs), memory, and networking components -- reaching $1 trillion in 2030. It also believes that it can capture a double-digit market share in the AI data center chip market.

As such, AMD sees revenue expanding at a 35%-plus compound annual growth rate (CAGR), bringing revenue to over $150 billion by 2030. The growth would be led by its data center segment, which is expected to surge at a 60% CAGR. AMD predicts reaching a 50%-plus share in the data center CPU market, while its artificial intelligence (AI) data center revenue would grow at an 80% CAGR.

At the same time, the company predicts it could generate over $20 in adjusted earnings per share (EPS) in the coming years. That would be a fivefold increase from the roughly $4 in adjusted EPS it is expected to produce this year. If AMD can hit those targets, its stock should have solid upside in the coming years.

Let's look at what can help drive this type of growth moving forward, and what could be some risks.

Finding a niche in inference

The biggest potential driver of AMD's growth is the overall growth of the AI infrastructure buildout. Right now, cloud computing companies, such as Amazon's AWS, Microsoft's Azure, and Alphabet's Google Cloud, are spending aggressively to build out their AI data centers, as are so-called neocloud companies such as CoreWeave and Nebius Group. Some other large tech companies, such as Meta Platforms, as well as countries, are also spending heavily.

Then there is OpenAI, which, together with Oracle, has one of the most ambitious AI buildout plans on the planet. AMD will already be a part of this, as OpenAI has taken a 10% stake in AMD and will deploy 6 gigawatts of its GPUs in the coming years. One gigawatt of power equals around $35 billion worth of AI chips, so this is a significant windfall.

Meanwhile, the company has a nice opportunity to capture some market share as customers moves more toward inference. While Nvidia's CUDA software platform has created a wide moat with training, since most foundational AI code is written on it, its edge is not quite as big with inference, where cost per inference is much more important because it is an ongoing expense. Meanwhile, it's been reported that Microsoft has been trying to develop toolkits to convert Nvidia's CUDA models to AMD's ROCm code so it can use more AMD chips for its inference workloads.

While inference is a big opportunity for AMD, its chips are not the only Nvidia alternative solution. Several companies have or are in the process of designing custom AI chips, called ASICs (application-specific integrated circuits), that are also aiming for this market. Both Alphabet and Amazon already have their own custom chips, so these customers will be harder to break into. As such, ASICs are a potential risk to AMD achieving the growth it has laid out.

Meanwhile, there is no guarantee that the current pace of AI infrastructure spending will continue. Right now, there is an AI race, but all players involved are going to have to see a benefit and a return on their investments, or else this spending won't last, so it is a risk.

Image source: Getty Images.

Is AMD stock a buy?

Looking at valuation, AMD stock trades at a forward price-to-earnings (P/E) ratio of 38.5 times 2026 analyst estimates, with a forward price/earnings-to-growth (PEG) ratio of 0.5. Stocks with a positive PEG ratio less than 1 are typically considered undervalued. So, on a valuation basis, the stock isn't pricey if it can meet or exceed its growth goals.

While there are risks, I think the company overall is in a pretty good position to capture market share, especially with companies like Microsoft that are not far along in custom AI chips, while it should also see solid growth with OpenAI. As such, I think investors can add the stock around current levels.

Geoffrey Seiler has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.