1 Unstoppable Stock to Buy Before It Joins Micron and Broadcom in the $1 Trillion Club

Micron (NASDAQ: MU) surprised many investors when it reached a $1 trillion market cap in May. Investors may have seen the memory chip opportunity, but few of them anticipated the stock's 700% surge over the past year.

Broadcom (NASDAQ: AVGO) hit the same milestone in December 2024. These two companies demonstrate a pattern of chipmakers producing tremendous returns amid the AI boom. This trade has already been the source of several trillion-dollar success stories, and Advanced Micro Devices (NASDAQ: AMD) looks ready to join them.

The AI chipmaker -- which not long ago had acquired the nickname "Advanced Money Destroyer" for its weak stock price performance -- has more than doubled its market cap year to date to around $840 billion. Strengthening fundamentals and a long-term plan have positioned Advanced Micro Devices to thrive in one of the biggest opportunities in tech right now.

Image source: Getty Images.

Analyzing the current data center opportunity

AI data centers have been the major catalyst for Advanced Micro Devices. These facilities need the company's AI chips, and the deep backing it has won from big tech companies implies that the gravy train will continue for a while.

Advanced Micro Devices delivered 38% year-over-year revenue growth in the first quarter, with data center revenue up by 57%. The data center segment makes up more than half of Advanced Micro Devices' total sales, which suggests its revenue acceleration will continue in future quarters.

The data center build-out isn't close to ending. Funding for Meta Platforms' 5-gigawatt Hyperion AI data center, located in Louisiana, recently crossed $50 billion, and it's still not finished. The final cost could end up being a lot higher, and it's only one of many AI data centers being built in the country.

AI processors are key equipment in data centers. In prior stages of the AI build-out, data center operators invested most heavily in GPUs (graphics processing units), which provide the bulk of the processing power required for training and inferencing workloads.

Recently, though, demand for CPUs (central processing units) has been steadily gaining momentum as AI infrastructure providers adjust to the reality that agentic AI will require data centers to be equipped with a much larger proportion of those chips.

Advanced Micro Devices designs both GPUs and CPUs, positioning it to benefit regardless of which chips gain momentum faster. That could help lift it to a $1 trillion valuation and beyond.

Advanced Micro Devices has already guided for multiyear growth

Advanced Micro Devices' first-quarter results were the new normal, not a blip. That's the analysts' consensus, based on the strategy that it published in November detailing how it plans to lead the $1 trillion compute market.

CEO Dr. Lisa Su said Advanced Micro Devices is "uniquely positioned to lead the next generation of high-performance and AI computing" while telling investors to expect revenues to grow at a compound annual rate of 35% or higher for the next three to five years. It also anticipates at least 60% compound annual revenue growth for its data center segment during that stretch.

The clamor asserting that there's an AI bubble intensifies any time a natural correction in the sector takes place. However, Advanced Micro Devices' recent earnings and its multiyear projections throw cold water on that thesis. Achieving these types of growth targets could certainly propel AMD to a $1 trillion market cap.

Physical AI can be a major tailwind

Today, most of Advanced Micro Devices' revenue comes from chips that are going into AI data centers, so investors may be underappreciating its opportunity in physical AI. Humanoid robots, self-driving vehicles, drones, and smart glasses all need chips like the ones it designs.

As the markets for each of those products expand, Advanced Micro Devices' stock may get carried along for the ride. Fortune Business Insights projects a 50.6% compound annual growth rate for the global humanoid robot market through 2034, projecting a $165.1 billion valuation for it at the end of that period, and a 32.3% rate for the autonomous vehicle market.

The companies leading these markets won't want to test experimental chips early in their industries' cycles. Once these industries get hot, there will be a small window of time when companies will compete for large market shares. Expect that the companies that operate in these industries will prefer to rely on established AI chipmakers like Advanced Micro Devices.

Physical AI may be the stock's next catalyst, but the data center segment is still delivering compelling results. Advanced Micro Devices expects that segment to remain hot for multiple years.

Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, Meta Platforms, and Micron Technology. The Motley Fool has a disclosure policy.