AMD Just Crossed $1 Trillion. Is it Still Worth Buying Now?

Advanced Micro Devices (NASDAQ:AMD) shares rose by 10% on Monday to a new all-time high of more than $615. This pushed the chipmaker's market cap above $1 trillion for the first time ever. The stock is now up by more than 180% year-to-date, and that's on top of an already impressive performance in 2025.

It's historically been a mistake to bet against AMD, at least since Lisa Su became CEO. The company was thought of as a distant also-ran to Intel (NASDAQ:INTC) a decade ago. And it was thought of as a very distant second in the AI chip race to Nvidia (NASDAQ:NVDA) until very recently. But the company has shown that it's a legitimate player and serious competitor to both industry giants.

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Why did AMD surge to a $1 trillion valuation this week?

Monday's jump was a continuation of a five-day rally. To be fair, it wasn't just AMD. Intel also surged by double-digits on Monday, and the Philadelphia Semiconductor Index increased by more than 4% overall. It's been a strong rally for the entire space.

However, some company-specific news items are driving the stock higher. Specifically, one of AMD's biggest customers, Meta Platforms (NASDAQ:META), rolled out its new AI agent, Muse, which rapidly climbed to the top of Apple's App Store and could lead to greater-than-expected demand for the processors needed for agentic AI. Meta is AMD's second-largest customer, so Muse's success could be a major tailwind.

Do AMD's numbers justify a trillion-dollar valuation?

Let's be clear. At $1 trillion, AMD is not a cheap stock. It now trades at about 24 times trailing sales and more than 55 times forward earnings expectations. The question is, at this lofty valuation, does AMD still make sense as an investment?

The company's recent results have been impressive. In the second quarter, AMD's revenue grew 50% year-over-year to $11.5 billion, led by its data center revenue, which more than doubled. Sales of the company's EPYC server processors grew 70% year-over-year, and Su said that agentic AI will create the need for far more CPUs in data centers. The company's Helios complete rack system is shaping up to be a serious competitor to Nvidia, with massive deals from several hyperscalers. Looking ahead, management expects data center revenue to more than double again in 2027.

The bottom line

At a $1 trillion valuation, AMD isn't cheap, but it isn't necessarily expensive either. 55 times forward earnings for a business growing its top line at 50%+ and with improving margins isn't unreasonable. In a nutshell, this valuation is based on real business results, not just hype. AMD is now a true contender for the billions being spent on AI compute power by the world's largest technology companies.

On the other hand, at this valuation, there is certainly more reason to be cautious. For one thing, AMD depends on continued AI capex, and any pullback in hyperscaler spending could hurt growth. That's especially concerning, considering that there's a growing consensus that the pace of AI development needs to slow down.

Plus, while AMD's valuation isn't unreasonable, it certainly trades at a steep premium to fellow chip stocks Nvidia and Broadcom (NASDAQ:AVGO), which are valued at about 19 and 21 times forward earnings, respectively. There's a lot of future growth priced into AMD at these levels.

The bottom line is that AMD is certainly a high-quality business, and it's not difficult to see why its stock price has performed so well. However, there's quite a bit of future growth priced in at these levels, so those considering investing would be wise to build their positions gradually instead of all at once.

Matt Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, Intel, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.