Is AMD Stock a Buy, Sell, or Hold Right Now? Here's What I'm Doing.

Advanced Micro Devices (NASDAQ: AMD) has had an incredible year as a stock. It's up around 140% so far in 2026, good enough to be in the top 10 best-performing stocks in the S&P 500. It's also crushing rival Nvidia (NASDAQ: NVDA), which is only up around 13%.

However, what's in the past is in the past. It's time for investors to look to the future and see what to do with AMD stock. I'm currently not an AMD shareholder (to my error), but if I were, would it be time to hold or sell the stock? Or should I take a look at opening up a position?

Image source: The Motley Fool.

AMD's growth case is looking up

At the start of the AI race, AMD's technology was lagging behind Nvidia's. As a result, it lost a ton of early market share to its rival, Nvidia. However, AMD has started to catch up and has made several deals with AI hyperscalers, like OpenAI, to supply them with computing power. This has led to strong growth, with data center revenue rising 107% year over year in the second quarter to $6.7 billion.

AMD also has significant consumer and embedded processor segments, so its overall growth rate in Q2 was 52%, but the biggest improvement in AMD has come from its profit margin.

AMD Profit Margin (Quarterly) data by YCharts.

AMD's profit margin has improved steadily and continues to get stronger. If AMD can keep this trend up, the future looks very bright for the company.

Wall Street analysts expect AMD's growth rate to take a step back next quarter, and only rise to 41%. However, they expect 57% growth in the fourth quarter, and in 2027, they expect 75% growth. That's spectacular, and makes investors wonder if AMD stock could repeat in 2027.

That's the bull case, but the bear case is much more rooted in reality.

AMD's stock has already priced in future growth

I am not denying that AMD has great growth prospects. I think that it will have a phenomenal year as a company in 2027. The issue is that all this growth is already priced into AMD's stock. If you value the stock using this year's and next year's earnings estimates, it reveals that AMD is a very expensive stock.

AMD PE Ratio (Forward) data by YCharts.

AMD trades for a very pricey 68 times forward earnings and 33 times next year's earnings. For reference, rival Nvidia trades at 27 times trailing earnings right now. That means that there is about a year and a half worth of growth priced into AMD's stock, which could affect future returns.

While I think AMD's great year has been fun for its investors, they're about to get a reality check unless AMD can absolutely blow away analyst expectations. Is there a case to just hold on to the stock? I don't think so.

When you get to extreme valuation levels like this, odds are far higher that the stock will underperform or lose value, rather than gaining. As a result, I think investors are likely better off selling and rotating into an industry peer like Nvidia. AMD has had a great year, but it has likely been too great a year, as the valuation of the stock doesn't match the business performance it's delivering.

There are far better options out there than AMD right now. If you were smart enough to get into AMD stock before it took off earlier this year, it's time to exercise some self-control, take gains, and move on to the next candidate.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.