AMD Is Up 149% Year to Date. Is the AI Chip Rally Getting Dangerously Crowded, or Is There Still Room to Run?

Let me get the obvious thing out of the way: Yes, Advanced Micro Devices (NASDAQ: AMD) is up around 149% year to date. Yes, the stock price crossed $550 this week. Yes, a lot of people who didn't own it at the start of the year are now looking at the chart and wondering if they're buying someone else's gains.

I get all that. But I think walking away here is a mistake. I also think going all in here is a big mistake. In the first quarter of 2026, Advanced Micro Devices posted $10.3 billion in revenue -- up 38% year over year -- with data center revenue of $5.8 billion, up 57%. Non-GAAP (adjusted) earnings per share came in at $1.37, operating income hit $2.5 billion, and free cash flow reached a record $2.6 billion for a single quarter -- more than 3 times the $727 million it generated in Q1 2025.

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Management then guided for Q2 2026 revenue of approximately $11.2 billion, which would represent 46% year-over-year growth. CEO Lisa Su said customer engagement around the new MI450 Series artificial intelligence (AI) GPUs and Helios rack systems is "strengthening," with leading customer forecasts now exceeding AMD's own initial projections. That's not a company riding hype. That's a company that keeps raising its own bar and then clearing it.

Why there's still room for AMD to run

AMD stock is not cheap in the conventional sense. But the conventional sense doesn't apply cleanly to a company growing earnings at 40%-plus per year, with a non-GAAP price-to-earnings-to-growth (PEG) ratio of 1.32 that's at a significant discount to its peer group. A discounted PEG is the market's way of saying it doesn't fully believe the growth story. Right now, AMD's growth story keeps proving the skeptics wrong every single quarter.

The rally isn't over because the demand driving it isn't over. Inferencing and agentic AI are driving sustained, durable demand for the high-performance compute that AMD's Epyc server CPUs and Instinct AI accelerators provide. Every time a company spins up a new AI agent, runs a model in production, or expands a data center, AMD's addressable market grows.

As I mentioned earlier, the company is preparing to launch its MI450 AI chips later this year, with major customers like OpenAI and Meta Platforms already committing to large-scale deployments, positioning AMD to capture a growing share of the booming AI data center market.

While it's reasonable for some investors to worry about AMD's valuation after its 351% gain over the past calendar year, the company's earnings and revenue growth could still be in the early stages. If AMD continues narrowing the gap with Nvidia while expanding its AI ecosystem, today's valuation could look far more reasonable a few years from now. For long-term investors, the recent pullback may be less of a warning sign and more of an opportunity to buy a leading AI chipmaker before its next phase of growth unfolds.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.