Canadian investors with a sizeable risk appetite and a long-term horizon should consider holding quality growth stocks in a Tax-Free Savings Account (TFSA). Any returns generated from qualified investments in this registered account are exempt from Canada Revenue Agency taxes. This tax-sheltered status makes the TFSA an ideal account to hold stocks positioned to deliver outsized gains in 2025 and beyond.
The ongoing volatility surrounding the equity market has dragged valuations of several tech stocks lower. In this article, I have identified one such artificial intelligence (AI) stock — Advanced Micro Devices (NASDAQ:AMD) — that could turn a $7,000 investment into $22,000 by 2028. Let’s see why.
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TFSA investors: Add AMD stock to your portfolio in 2025
Valued at a market cap of US$163 billion, Advanced Micro Devices has returned 3,550% to shareholders in the past decade. Despite its market-thumping returns, the tech stock trades 52% below all-time highs, allowing you to buy the dip.
Advanced Micro Devices reported record financial results for its fourth quarter and full year of 2024, with strong growth in data centre and client segments offsetting challenges in gaming and embedded markets.
The company’s strategic pivot to artificial intelligence is paying significant dividends, establishing AMD as a viable competitor to NVIDIA in the lucrative data centre AI accelerator market.
AMD delivered record fourth-quarter (Q4) revenue of US$7.7 billion, up 24% year over year, driven by a 69% surge in data centre revenue to US$3.9 billion and a 58% increase in client revenue to US$2.3 billion. For the full year, AMD’s revenue grew 14% to US$25.8 billion, with net income increasing 26% and free cash flow more than doubling.
“2024 was a transformative year for AMD,” said Chief Executive Officer Lisa Su during the earnings call. The company successfully established its “multi-billion dollar data centre AI franchise,” delivering over US$5 billion in data center AI revenue from its Instinct graphics processing unit (GPU) lineup after starting from zero just a year earlier.
AMD’s rapid growth in its data center AI business has exceeded expectations. Its MI300 accelerators power sophisticated AI models at Microsoft, Meta, and other major technology companies. Moreover, AMD is accelerating its product roadmap to maintain momentum, announcing that production of its next-generation MI350 series will begin mid-2025, earlier than originally planned.
Is the tech stock undervalued?
AMD expects strong double-digit growth for its data center central processing unit (CPU) and GPU businesses in 2025. The company is projecting its AI accelerator business to reach “tens of billions” in annual revenue in the coming years, targeting a total addressable market forecast to touch US$500 billion by 2028.
Su addressed industry concerns about the emergence of AI-specific application-specific integrated circuits (ASICs) potentially threatening GPU dominance, stating that while ASICs will have a place for specific applications, general-purpose GPUs will maintain an advantage due to their programmability and adaptability to rapidly evolving AI algorithms.
AMD also gained significant market share in server CPUs with its EPYC processors, reporting “well over 50% share at the majority of our largest hyperscale customers.” AMD expects to continue taking server market share in 2025, projecting strong double-digit percentage revenue and earnings growth for the overall business.
AMD is forecast to increase revenue from US$25.78 billion in 2024 to US$38.47 billion in 2026. Comparatively, adjusted earnings per share is forecast to expand from US$3.31 in 2024 to US$7.8 in 2027.
If AMD stock is priced at 40 times trailing earnings, it will trade around US$312 in early 2028, indicating an upside potential of 212% from current levels. So, an investment of $7,000 in AMD stock today could be worth almost $22,000 by 2028.
