AMD Stock Just Fell Below the Price I Said I'd Pay for It.

Shares of chipmaker Advanced Micro Devices (NASDAQ:AMD) lost about 17% of their value in one session on Thursday, Nov. 5, closing at $404.40. The company itself didn't announce anything new that day.

Instead, chip stocks sold off across the board as election wins by candidates who vowed to limit artificial intelligence (AI) data centers fueled rising worries about the AI boom. The Philadelphia semiconductor index fell 12.3%, its worst day since March 2020.

After AMD's third-quarter results on Nov. 3, I wrote that I'd consider buying the stock if it traded around $480. That price was 30 times the non-GAAP (adjusted) earnings per share analysts expect AMD to post in 2027 on average, which is about $16. Thursday's close is around 16% below it.

What changed between Tuesday night and Thursday's close? As far as I can see, just the share price did.

Image source: AMD.

AMD's 2027 outlook hasn't changed

Even after Thursday's fall, AMD stock is up around 89% in 2026. But it's also about 38% off the all-time high close it set on Oct. 6 ($649.42) -- lots of ground to give up in a month.

Meanwhile, the business is speeding up. Showing how much demand there is for its data center chips, AMD's third-quarter revenue rose 45% from a year earlier to a record $13.4 billion. AMD is guiding for around $17 billion in fourth-quarter revenue, about 66% more than in the same period of 2025.

And on the Nov. 3 earnings call, CEO Lisa Su said AMD now expects revenue to rise over 80% in 2027. Put another way, growth is accelerating, from 45% in the third quarter to around 66% in the fourth and more than 80% for 2027 overall.

Might the political worry in Thursday's sell-off hold that back? An analyst asked Su on the call about the land and power behind next year's ramp.

"We have been planning for this ramp with our customers jointly. So we have good visibility into 2027 ... land, power, shell, all of those, the data center infrastructure," Su said.

Simply put, the data centers AMD's chips are going to next year seem mostly planned already. Tighter rules for new construction could matter more for 2028 and later than for 2027.

A $16 year looks reachable

The $16 estimate is worth checking against AMD's own numbers. In the first nine months of 2026, the company's adjusted earnings per share were $5.12. Management's fourth-quarter guidance for revenue, margins and expenses implies about $2.90 more, for about $8 this year. Reaching $16 would mean a doubling.

Yes, that's a big leap. But AMD is already showing how profits can outpace sales. Adjusted earnings per share climbed 74% year over year in the third quarter, well above the 45% revenue growth. What's more, chief financial officer Jean Hu told analysts that operating expenses for 2027 should grow less than half as fast as revenue.

If revenue grows over 80% and operating expenses grow at under half that rate, I think a doubling of earnings looks reachable.

At Thursday's close, AMD shares sold for around 25 times the 2027 earnings analysts expect, on average. At my $480 buy price, the stock cost 30 times those expected earnings. At the October record, it cost around 40 times expected earnings. Buyers are now paying much less for the same expected profits than they were a month ago.

All at once, or in steps?

I'd buy in steps. After all, a stock that fell 17% in a day and about 38% in a month can keep falling, even when the business looks fine. And one of the worries driving Thursday's drop (new limits on data centers) might take months to play out, with headlines along the way pushing chip stocks around.

There's a reason in AMD's numbers, too. Free cash flow was $554 million in the third quarter, down from $1.5 billion a year earlier, as the company added to inventory and spent on capacity ahead of next year's sales. Until cash catches up with earnings, the stock might remain volatile.

My plan would be to buy a first chunk around Thursday's price and add the rest in a few pieces over the coming months -- a simple form of dollar-cost averaging. This way, a further drop would just mean buying the later pieces at a lower price.

In the end, AMD's outlook looks as strong as it did on Nov. 3, and the stock is around 16% below the price I said I'd pay. To me, that's enough reason to start buying. Still, maybe the stock gets even cheaper. So I'd buy it in steps.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices. The Motley Fool has a disclosure policy.