AMD's AI Comeback: Why 2026 Could Be the Turnaround Year

There's no two ways about it. Nvidia has been the centerpiece of the artificial intelligence (AI) revolution thus far. Its processors are the heart and soul of most of the planet's AI data centers. And its stock has also outperformed almost all of its peers.

Rival Advanced Micro Devices (NASDAQ: AMD), conversely, has largely been left out of the discussion, while AMD shares have lagged in performance.

The much smaller technology company may be about to make up for lost time, however, because Advanced Micro Devices is (finally) making a big foray into the artificial intelligence fray. Investors might want to make a point of participating in the effort.

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AMD is finally getting serious about artificial intelligence

Hints of AMD's bigger artificial intelligence ambitions were first dropped in November. That's when CEO Lisa Su plainly stated, "AMD is entering a new era of growth fueled by our leadership technology roadmaps and accelerating AI momentum." Specifically, Advanced Micro Devices' so-called Helios platforms powered by its Instinct series of GPUs (graphics processing units), purpose-built for AI, will be its workhorse for the foreseeable future. The company ultimately expects annualized long-term AI revenue growth in the ballpark of 80%. Meanwhile, analysts believe that growth could more than double the company's total top line by 2028.

AMD said little more about the matter until the CES event at the beginning of this year. That's when the company reminded everyone that it still has every intention of being a key player in the artificial intelligence space. Specifically, that's when it gave the world a closer look at its Helios rack-scale tech, with each rack being able to handle up to 3 AI exaflops' (3 quintillion operations per second) worth of computational performance. That's also when the company unveiled new Ryzen processors capable of turning personal computers, automobiles, and industrial robots into true self-contained AI-capable devices.

Just keep things in perspective

Advanced Micro Devices is making a more concerted effort to penetrate the AI market more than it has in the past, with better purpose-built solutions. But it still faces stiff competition, and not just from Nvidia. Intel is stepping up its game as well. Even companies that haven't been in the chip business in the past -- like Alphabet and Amazon -- are now designing and building their own AI processors. The market isn't simply going to roll over and let AMD steal market share.

Nevertheless, Advanced Micro Devices is winning new share of the AI processing business. During the most recently reported three months ending in September, AMD's data center revenue (which is mostly AI) improved to the tune of 22% year over year, and that was without its newer Instinct GPUs that at least some prospective customers are holding out for. Once the Instinct MI450 series of GPUs with up to 432 gigabytes of RAM operating at 19.6 terabytes per second launches in the latter half of 2026, don't be surprised to see the company's AI growth rate soar just as Su has suggested.

Perhaps of more interest to investors is the fact that, given its subpar performance since November, very little of this potential upside actually appears to be priced into the stock.

James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Intel, and Nvidia. The Motley Fool has a disclosure policy.