Why Advanced Micro Devices Could Be This Year's Best Value Play

Advanced Micro Devices (NASDAQ: AMD) stock has already risen by more than 105% over the last year of trading. With the company's market capitalization sitting at $407 billion, the semiconductor specialist is valued at approximately 11.8 times this year's expected sales and 36 times expected earnings.

With those growth-dependent valuation levels, AMD may not look like much of a "value" play by conventional metrics. On the other hand, the passage of time could wind up showing that the stock was actually in deep-value territory at current prices.

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AMD will likely continue to take market share away from Intel in the PC and server central processing unit (CPU) market. More importantly, the company looks poised to score some significant wins in the artificial intelligence (AI) graphics processing unit (GPU) space.

While ultra-high-end GPUs remain the most important tools for training new models and pushing AI forward, hardware that's less than bleeding-edge can still run AI models and be far more efficient in terms of cost. These alternatives won't command the same high margins as top-of-the-line processors, but an increased sales mix for AI chips should still have a significant beneficial impact on AMD's margins.

AMD's AI wins could accelerate in 2026

AMD stock probably won't surpass or catch up to Nvidia when it comes to ultra-high-end GPU performance this year, but it doesn't need to accomplish those feats in order to post big wins in the AI space. OpenAI is one of the biggest users of Nvidia's processors, but it announced last year that it had signed a major new partnership with AMD.

There's a good chance that leading tech giants will continue to aim to reduce some of their reliance on Nvidia's processors, and AMD GPUs offer quick and easy avenues for diversification. Nvidia looks poised to retain a strong lead when it comes to the training of next-gen AI models, but actually running the models is less hardware intensive -- and AMD should see tailwinds connected to rising inference demand.

If growth for AI revenues continues to accelerate in its upcoming quarterly reports, investors could be willing to pay higher valuation multiples to own a piece of AMD. The company's revenue already jumped 36% year over year in 2025's third quarter, and the business posted a gross margin of 52%.

With the potential for AMD's AI infrastructure deals to start showing up as sales and lifting margins in the near future, the market's sales and earnings outlook for the stock could quickly be revised upwards.

Keith Noonan has positions in Intel. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool has a disclosure policy.