Missed Advanced Micro Devices' Big Move? Here's Why It's Still a Buy

Advanced Micro Devices' (NASDAQ: AMD) stock has rocketed up by about 75% in the last month. It's natural to think you've missed the opportunity, but based on the company's long-term financial outlook, it's not expensive.

Artificial intelligence (AI) spending is growing rapidly. Meta Platforms recently announced it would deploy up to 6 gigawatts of AMD Instinct graphics processing units (GPUs) over the next several years. This followed a similar deal between AMD and OpenAI announced in October.

These deals are positioning AMD for strong growth over the next five years. Its long-term financial targets make the stock look reasonably priced today.

Image source: The Motley Fool.

AMD expects adjusted EPS to exceed $20

In November, CEO Lisa Su said, "AMD is entering a new era of growth fueled by our leadership technology roadmaps and accelerating AI momentum."

The company outlined its long-term financial targets, calling for revenue to grow at an annualized rate of 35%. But the eye-opener was that it expected adjusted earnings per share to exceed $20 annually within the next three to five years.

Over the last six months, the stock traded between $161 and $264. At the midpoint of about $200, that was 10 times the company's expected earnings over the next five years. That's cheap for one of the leading chip suppliers.

At the current share price of around $340, it's trading around 17 times management's earnings target. While not inexpensive, it is reasonable for this level of expected growth. Let's now look at why AMD is positioned to achieve this growth.

CEO Lisa Su likes AMD's opportunity in AI inference

Nvidia will likely remain the GPU leader, but AMD is poised to get a larger share of AI infrastructure spending. Its advantage lies in its chiplet architecture. This allows it to customize computing solutions for different AI workloads, particularly AI inference. As more people use AI agents, demand for computing systems optimized for real-time decision-making is growing.

AMD has been investing for a future in which inference demand exceeds model training, and 2026 might be the year it flips. In March, Su noted, "We've always been very optimized for inference [...] We're seeing the growth of agentic AI. All of these things favor our architecture."

Demand for AMD's data center products is already driving results. Revenue grew 34% year over year to $34 billion in 2025, and management expects AI revenue alone to reach "tens of billions" by 2027.

Obviously, AI chip suppliers like AMD could stumble if data center spending suddenly paused due to overspending. But AMD's upcoming launch of its Instinct MI450 GPU and Helios computing system are good reason to consider buying the stock.

"We're very bullish about the positioning of MI450," Su said in March. "I think it's the right time. It's the right product [...] We have customers who are anxious to get it in their data centers."

AMD has a large market cap of $552 billion. But it is still relatively low compared to other large semiconductor companies. Broadcom has a market cap of $1.9 trillion, while Nvidia's is approaching $5 trillion. Based on AMD's advantage in meeting inference demand, it might be destined to join the trillion-dollar club.

John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.