AMD Beat Estimates, Yet the Stock Slipped: Here's What Wall Street Is Really Worried About

There is no doubt that semiconductor stocks have been some of the most direct beneficiaries of the artificial intelligence (AI) revolution. While Nvidia has claimed the top spot in the chip realm, peers such as Broadcom and Taiwan Semiconductor Manufacturing have also earned positions in the trillion-dollar club thanks to AI-driven tailwinds.

In the background, Advanced Micro Devices (NASDAQ: AMD) has also put on an impressive performance despite being largely overshadowed by its chief rival, Nvidia. In early November, AMD reported financial and operating results for the third quarter. Overall, the report was solid; and yet, Wall Street still found some reasons to sell the stock.

Let's break down what's been causing AMD stock to sell off post earnings and assess whether now is an opportunity to buy the dip.

Why did AMD stock plummet after earnings?

Since the company reported earnings on Nov. 4, its shares have retreated by about 7.5% as of this writing (Nov. 18). I believe a number of factors influenced the sell-off:

• Macro uncertainty: At the time of AMD's third-quarter earnings, the U.S. government was still in the midst of a shutdown that had no end in sight. Political friction isn't necessarily anything new, but given how long this specific shutdown had already lasted -- coinciding with earnings season -- made it challenging for Wall Street to look beyond the gridlock in Washington. In essence, investors had to assess the shutdown's impact on the economy -- creating a sense of prolonged uncertainty and ultimately outweighing a strong report.
• China's AI market: Nvidia CEO Jensen Huang estimates that the addressable market for AI in China is $50 billion annually. This would appear to be a great opportunity for designers of graphics processing units (GPUs), but one of the biggest headwinds for both Nvidia and AMD is selling their chips in China. A combination of national security concerns and trade negotiations tied to the new tariff policies has made it more challenging to penetrate the China market. Against this backdrop, AMD's quarterly operating results exhibit some notable ebbs and flows.
• Potential hiccups in the supply chain: AMD relies heavily on Taiwan Semiconductor to manufacture its GPUs. Given the ongoing tensions between Taiwan and China, some investors are naturally wary that the company's supply chain could become compromised should geopolitical pressures continue.
• Momentum like there's no tomorrow: Despite the recent sell-off, the stock has still gained 91% in 2025. Given that shares have already doubled, it was going to require an absolute monster third-quarter report to keep the momentum going.

While the points above are likely contributing to some of the downward pressure on the stock, there is one other factor that I think has Wall Street most concerned.

Image source: AMD.

During the third quarter, AMD's data center business generated $4.3 billion in revenue, representing 22% growth year over year. While this level of growth is respectable, it's nowhere near what Nvidia registers. Furthermore, the company's operating margin actually shrunk by 400 basis points.

The combination of mundane growth and deteriorating profit margins may be fueling a narrative that AMD will struggle to scale up its date center operation in the AI infrastructure era. And that may be leading some investors to doubt the company's long-term trajectory.

AMD's data center business is positioned for the long term

On the surface, I understand why some investors may have been unimpressed with the third-quarter earnings report. However, selling the stock over a narrative that the company is lagging behind the competition is shortsighted.

For starters, Nvidia had a first-mover advantage in the GPU market. With that in mind, it's actually quite impressive that AMD has been able to build and scale up its own competing AI accelerator platform in just a couple of years.

Hyperscalers including Oracle, Meta Platforms, and Microsoft all leverage AMD's computing platform. Considering that capital expenditures (capex) geared toward AI infrastructure are expected to reach $3 trillion to $4 trillion over the coming years, AMD looks well-positioned to capture incremental market share as it brings its new MI450 chips to life. Furthermore, the company just recently signed a 6-gigawatt infrastructure deal with OpenAI.

The important theme to keep in mind here is that many of these deals are multi-year contracts expected to scale up alongside accelerating investments in AI infrastructure through the rest of the decade. What's important is that AMD management is guiding toward both increased revenue and exponentially higher profit margins as these deals begin to bear fruit.

Image source: AMD.

Should you buy the dip in AMD stock?

AMD shares current trade at a forward price-to-earnings multiple (P/E) of 58. This appears a bit rich, but as is often the case with valuation, there's more to it than just taking these figures at face value.

AMD PE Ratio (Forward) data by YCharts.

There are other segments underneath the broader business that generate inconsistent profitability. Given this fact, in combination with a data center business that is still in growth mode, the company's earnings profile has not yet reached a normalized, more predictable level.

In turn, its earnings could be considered artificially deflated, hence valuation multiples look more stretched than they really are.

Nevertheless, given the company's progress in winning over multiple hyperscalers as well as management's plan to produce both higher revenue and improving profitability, I am confident that the stock can grow into its premium valuation.

For these reasons, I see AMD as a compelling opportunity to buy and hold in the AI infrastructure era, and I consider now a great opportunity to buy the dip.

Adam Spatacco has positions in Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and 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.