Why AMD Stock Soared 46% in May
Key Points
In May, AMD stock received a strong tailwind from the broader market's strength and investors' enthusiasm for AI stocks.
But its biggest catalyst was the release of robust Q1 results and rosy guidance.
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Shares of Advanced Micro Devices (NASDAQ: AMD), which primarily makes central processing units (CPUs) for various applications and graphics processing units (GPUs) for enabling artificial intelligence (AI) in data centers, soared 45.6% in May, according to data from S&P Global Market Intelligence. This is not only a phenomenal monthly performance, but it also follows the stock skyrocketing 74% in April.
For context, shares of AI GPU leader Nvidia gained 8.4% in May. For additional context, last month the S&P 500 index returned 5.3%, and the tech-heavy Nasdaq Composite index returned 8.4%.
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Robust first-quarter results
On May 6, AMD stock surged 18.6%, following the release of its first-quarter results on the prior afternoon. Moreover, the stock gained 28.1% in the three days following this release.
AMD reported quarterly revenue of $10.3 billion, up 38% year over year. This result easily beat Wall Street's consensus estimate of $9.89 billion. Revenue growth was driven by the company's data center segment, which generated $5.8 billion in revenue, up 57% from the prior-year period. The segment experienced strong demand for the company's EPYC CPUs and Instinct GPUs, which continue to ramp.
Client and gaming segment revenue was $3.6 billion, up 23% year over year. Embedded segment revenue was $873 million, up 6%.
"We delivered an outstanding first quarter, driven by accelerating demand for AI infrastructure, with Data Center now the primary driver of our revenue and earnings growth," said CEO Lisa Su.
Earnings per share (EPS) based on generally accepted accounting principles (GAAP) jumped 91% to $0.84. Adjusted EPS was $1.37, up 43% year over year. This result sprinted by the $1.29 that Wall Street had expected.
Looking ahead
For the second quarter, AMD expects revenue of about $11.2 billion, representing year-over-year growth of approximately 46%, and notably higher than the $10.5 billion Wall Street had been modeling. It also guided for an adjusted gross margin of 56%. For context, this metric was 55% in the first quarter.
"We are seeing strong momentum as inferencing and agentic AI drive increasing demand for high-performance CPUs and accelerators [GPUs]. Looking ahead, we expect server growth to accelerate meaningfully as we scale supply to meet demand," Sue stated.
A stock worth considering buying
Reiterating my conclusion in my AMD stock April performance article:
In short, Advanced Micro Devices is firing on all cylinders with strength in GPUs and CPUs and is having success in inking some big partnerships. Its stock is worth considering buying.
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Beth McKenna 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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