While the artificial intelligence (AI) narrative has been dominated by big tech giants such as Nvidia, Microsoft, Meta, and Alphabet, one chip stock is quietly flying under the radar. Valued at a market cap of US$190 billion, Advanced Micro Devices (NASDAQ:AMD) is fast gaining traction in the AI segment.
Advanced Micro Devices is a semiconductor company operating through four segments: Data Center, Client, Gaming, and Embedded. AMD designs and manufactures AI accelerators, x86 microprocessors, graphics processing units (GPUs), and system-on-chip products.
Key brands include Ryzen processors for consumers, EPYC for servers, Radeon graphics cards, and Instinct AI accelerators for data centres. AMD serves original equipment manufacturers, cloud providers, system integrators, and distributors, providing AI and compute infrastructure for hyperscale environments.
Down 45% from all-time highs, AMD is a tech stock that offers massive upside potential to shareholders in 2025. Let’s see why.
AMD’s widening AI revenue
AMD achieved over US$5 billion in MI300 GPU revenue in its first year, demonstrating significant progress in the competitive AI market. Other key highlights include 36% year-over-year revenue growth in Q1, driven by a 57% increase in data centre sales.
However, Q2 faces a US$700 million revenue impact from export license requirements affecting MI300 sales to China, despite strong underlying demand from DeepSeek and other customers.
AMD maintains confidence in its AI strategy, emphasizing advantages in inference workloads due to superior memory capacity and bandwidth. It also recently launched the MI350, featuring 35 times faster inference performance, and plans to introduce the MI400 next year, which will include expanded system-level solutions, such as GPUs, CPUs, and DPUs.
The client business showed exceptional strength with 68% growth, driven primarily by average selling price increases from product mix rather than unit growth.
A strong performance in Q1
AMD reported impressive first-quarter results, with revenue growing to US$7.4 billion, exceeding analyst expectations despite facing new regulatory headwinds in China.
The chipmaker showcased robust performance across multiple business segments, positioning itself for continued growth in the competitive AI and data centre markets.
The Data Center segment led the charge, driven by strong adoption of AMD’s fifth-generation EPYC processors and sustained demand for Instinct AI accelerators.
Major cloud providers, including Amazon’s Web Services, Google, and Oracle, expanded their EPYC deployments, with over 30 new instances launched during the quarter. Enterprise customers also showed strong momentum, with EPYC-powered cloud instances activated by Fortune 2000 companies more than doubling year-over-year.
AMD’s Client and Gaming segment saw a 28% increase in sales in Q1, marking the fifth consecutive quarter of market share gains. It achieved record client CPU pricing driven by premium desktop and mobile Ryzen processors, with desktop channel sales surging more than 50% year-over-year.
The newly launched Radeon 9070 series graphics cards generated exceptional demand, setting first-week sales records. However, AMD faces challenges from new export controls targeting its MI308X AI chips, which are destined for China.
Is AMD stock undervalued?
CEO Lisa Su emphasized the company’s confidence in delivering strong double-digit revenue growth for 2025, supported by market share gains in CPUs and the ramp-up of new AI accelerator products, despite regulatory headwinds.
Analysts tracking the tech stock expect revenue to increase from US$25.8 billion in 2024 to US$55.8 billion in 2029. Moreover, adjusted earnings per share are forecast to expand from US$3.31 to US$9.91 in this period.
If AMD stock is priced at 25 times forward earnings, a reasonable valuation, it will trade around US$248 in early 2029, surpassing its current price of US$116.
