The S&P 500 Sank by 5% Last Month, but Here's Why This Super Semiconductor Stock Bucked the Sell-Off

Ongoing geopolitical tensions in the Middle East have sent the price of oil soaring, fueling fears of a slowdown in the U.S. economy. As a result, the S&P 500 (SNPINDEX: ^GSPC) stock market index plummeted by 5% in March, with many individual stocks suffering even steeper declines.

But Advanced Micro Devices (NASDAQ: AMD) bucked the sell-off, delivering a gain of 2.5% for the month. Short-term moves in the stock market are usually just noise, especially during periods of heightened volatility. But AMD is gearing up for one of its strongest years ever, so it makes sense that investors are holding on to their shares.

AMD has become one of Nvidia's top competitors in the market for data center graphics processing units (GPUs), which are the primary chips used in artificial intelligence (AI) development. Here's why its stock could remain resilient for the foreseeable future.

Image source: The Motley Fool.

AMD is about to ship its most powerful chips ever

AMD began selling AI GPUs for the data center in 2023, starting with its MI300. The company has launched several new generations since then, and even though its latest chips still trail Nvidia's in terms of performance, they have attracted major customers like OpenAI, Oracle, Microsoft, and Meta Platforms.

In the second half of this year, AMD will start shipping its new MI450 GPUs, which can be combined with specialized hardware and software in a fully integrated data center rack called Helios. In this configuration, the company says the MI450 will deliver a whopping 36 times more performance than its previous generations of GPUs, like the MI400 and MI355.

In fact, Helios is expected to feature 50% more memory capacity than Nvidia's upcoming Vera Rubin GPU system, which is widely expected to lead the industry when it reaches customers later this year. A higher memory capacity typically translates to faster processing speeds, so Helios could bring AMD one step closer to matching its greatest rival.

Meta Platforms and OpenAI will be two of the first customers to receive the MI450 later this year. Both companies plan to deploy 6 gigawatts of computing capacity using AMD GPUs over the next several years. Since a single gigawatt requires anywhere from 500,000 to 1 million chips (depending on their performance), these deals could be worth tens of billions of dollars.

2026 could be AMD's strongest year so far

AMD's data center business generated a record $16.6 billion in revenue during 2025, which was an increase of 32% from the year-ago period. It made up almost half of the company's total revenue of $34.6 billion for the year, highlighting its importance to the overall organization.

But this is only the beginning. AMD CEO Lisa Su believes the company's data center business will grow by an average of 60% per year over the next three to five years, starting in 2026. From 2027 onward, Su expects data center revenue to be in the tens of billions of dollars.

However, there is a risk to those rosy forecasts. OpenAI is slated to become one of AMD's largest customers based on the GPU deal I mentioned earlier, but Wall Street is increasingly worried about the start-up's ability to fulfill some of its astronomical financial commitments to chipmakers like AMD -- and also to cloud providers like Oracle and Microsoft.

For example, OpenAI reportedly agreed to rent $300 billion worth of computing capacity from Oracle over the next few years, plus a further $281 billion in capacity from Microsoft Azure. However, the start-up has only $25 billion in annualized revenue, and it's losing money at the bottom line. Although it raised $122 billion from investors in March to fund its ambitions, that barely covers a fraction of its future commitments.

Fortunately, AMD's customer pipeline is quite diverse, so it isn't relying on OpenAI alone. However, if the start-up can't buy as many GPUs from AMD as originally agreed, Su's revenue forecasts might be too high.

Why AMD stock could deliver more upside from here

Based on AMD's 2025 adjusted (non-GAAP) earnings of $4.17 per share, its stock is trading at a price-to-earnings (P/E) ratio of 48.7. Therefore, it isn't necessarily cheap considering the Nasdaq-100 technology index trades at a P/E ratio of 29.9 as I write this.

The most probable reason AMD stock held up during March while the rest of the market plummeted is that investors are enthusiastic about the prospect of a potential twofold increase in the company's data center revenue growth this year. Given the sheer demand for GPUs right now, AMD is likely to have an incredible amount of pricing power for the foreseeable future, which could significantly boost the profitability of its data center business -- especially as it scales.

In fact, Wall Street expects AMD to grow its earnings by 59% to $6.65 per share in 2026, and then by a further 62% to $10.77 per share in 2027. Those estimates place its stock at forward P/E ratios of 30.6 and 18.9, respectively, so it might actually be cheap right now from that perspective. As a result, AMD stock could be poised to deliver strong returns in 2026 (and beyond).

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.