Will AMD Be a $1 Trillion Company Before 2026 Is Over?
Key Points
AMD's growth is accelerating, but much slower than its stock is rising.
The stock looks pricey compared to its peers.
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Advanced Micro Devices (NASDAQ: AMD) has been a fantastic stock to own in 2026. It's up around 142% so far this year, easily outpacing the 4.5% growth put up by Nvidia, which it's commonly compared to.
This rise has brought it close to a $1 trillion valuation, currently around $850 billion. That means it only needs to rise about 18% more, which doesn't seem like a whole lot after the year that it has had so far.
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So, will AMD get into the $1 trillion club before 2026 is over? Let's take a look.
Image source: The Motley Fool.
Not all of the run-up has come from its business success
AMD is a bit more diversified than its counterpart Nvidia. While nearly all of the latter's business comes from data center sales, AMD's data center segment accounts for about half.
The company also has an embedded process division and exposure to the consumer market through its Client & Gaming division. However, neither of these is putting up the growth that the data center division is. In the first quarter, data center revenue was up 57% year over year, while Client & Gaming rose 23%.
Those are strong figures, but I wouldn't project a stock to rise 142% in half a year based on those figures alone. Net income rose 45% year over year in the first quarter, slightly more than its 38% overall revenue increase, indicating expanding margins. Once again, that's not exactly what I would expect from a company with a skyrocketing stock like AMD's.
The last item to check is whether the stock was undervalued at the start of the year. AMD spends a lot of time in Nvidia's shadow, and it's easy to overlook. However, it also spends a lot of time valued at a higher premium than Nvidia, and now trades for more than triple its price a year ago.
Data by YCharts; P/E = price to earnings.
That seems a bit odd to me, since Nvidia is growing much faster and expects to continue doing so. So, will AMD be a $1 trillion company by the end of 2026? I'd say maybe. It depends on how irrational the market wants to get with AMD's stock.
But I don't think it's the best artificial intelligence (AI) stock to buy, since the run-up has already occurred, and now it must grow into its lofty valuation. In the meantime, countless AI stocks are trading for reasonable price tags (like Nvidia) that make for far better investments than AMD.
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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
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