AMD Stock Value: Future Possibilities and Analysis

Advanced Micro Devices (AMD) is not alone in assessing its stocks. The past few months have offered exciting opportunities for investors, with the share closing at $252.92, gaining 109.7% year-to-date. In the last month, it has seen a surprising 58.6% increase. Such momentum leaves investors wondering: Is there more potential, or is this the peak?

The source of this excitement is the growing market interest in artificial intelligence computing. AMD has frequently been in the media following its latest hardware launches and new partnerships with major cloud infrastructure players. Indeed, the artificial intelligence narrative is creating significant expectations, but the market is continuously reassessing AMD's competitive position and its growth capability amid the rise of new competitors. Last week's 8.5% increase signals a renewed confidence in the company's future.

However, hype alone does not reflect reality. For those wanting to make a cool-headed decision, valuation is important. Taking a deeper look, AMD's valuation score is currently set at 2 out of 6. This indicates that the stock is undervalued by only two common methods. However, this is not an alarming situation; rather, it emphasizes that investors should examine AMD in more detail concerning fundamental metrics.

Let’s take a look at the valuation methods and what each might reveal. With the relevant data, it is possible to gain a better understanding of AMD's value that many investors overlook.

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by forecasting future free cash flows and discounting them to present values. This method helps investors understand the fundamentals based on the company's cash-generating ability.

The DCF model for Advanced Micro Devices starts with the most recently reported $4.1 billion free cash flow. Analyst forecasts predict that it could produce $18.7 billion in free cash flow by 2029. Projections extend over a five-year period up to 2035 and are converted to present values with the required rate of return.

In light of these assumptions and projections, AMD's estimated DCF fair value is set at $165.73 per share. Given that the stock price is at $252.92, this model suggests that the stock is trading approximately 52.6% above its intrinsic value. This implies that even considering solid long-term growth, AMD appears to be significantly overvalued.

Conclusion: OVERVALUED

You can see in detail how we arrived at this Fair Value calculation for Advanced Micro Devices by visiting the Valuation section of our company report.

Our Discounted Cash Flow (DCF) analysis suggests that Advanced Micro Devices may be 52.6% overvalued. To find better value opportunities or to create your own screening, you may look into undervalued stocks.

For growing and profitable companies, the Price-to-Sales (P/S) ratio is often the preferred method for valuation. This metric is particularly useful when companies reinvest in growth and helps investors understand how much the market values every dollar of revenue produced.

The "right" P/S ratio for a company depends on several factors like future growth outlook and prevailing risks. Expected higher growth or lower risks generally support a higher multiple, while lower growth or more uncertainty would require a lower ratio. Investors also provide more context by comparing this metric with industry averages and direct competitors.

Currently, AMD is trading at a 13.87x P/S ratio. This is just below the average of 14.51x for its competitors, but significantly higher than the broader semiconductor industry average of 5.28x. Simply Wall St's proprietary Fair Ratio, which considers the company's growth rate, profit margin, size, risk profile, and specific competitive environment through an algorithm, is set at 17.95x. Unlike industry or competitor averages, the Fair Ratio offers a more customized understanding of what "normal" valuation should be for AMD.

As AMD's current P/S ratio of 13.87x is notably below the Fair Ratio of 17.95x, it suggests that there is still value for investors. This approach considers more favorable growth and fundamentals.

Conclusion: VALUED

P/S ratios tell a story, but is the real opportunity elsewhere? Explore companies making big bets on explosive growth.

Earlier, we noted there’s an alternative way to gain a better understanding of valuation. Here’s a dynamic approach called "Narratives": this ties a company’s story to your financial predictions, providing a unique perspective for your investment decisions.

A Narrative is more than just the numbers on a page. It's where you express your personal thesis about Advanced Micro Devices; your reasoning for why you believe this company will perform (or won’t) and how your assumptions regarding future revenues, margins, and fair value shape your outlook.

Instead of relying on static data or broad ratios, Narratives combines key business factors, risks, and opportunities from a company's journey to derive numbers into a concrete prediction; this reveals an estimated fair value. This method is simple, accessible, and found on Simply Wall St's Community page; where millions of investors analyze by comparing and revising as innovations emerge.

With Narratives, you can see whether AMD's price is below, above, or equal to your fair value, and decide when to buy, hold, or sell. Also, these projections are automatically updated with new developments, so you always have the latest story.

For example, some AMD narratives predict a low fair value of $136 focusing on margin pressures and export risks, while others highlight accelerating AI deals and long-term market share gains, contemplating over $230 per share.

For Advanced Micro Devices, here’s a preview of two leading AMD narratives:

🐂 AMD Bull Case
Fair Value: $290.64
The current price is about 13% below this narrative’s fair value.
Estimated Revenue Growth Rate: 31%
AMD’s aggressive expansion in AI and efficiency improvements under CEO Lisa Su are expected to lead to explosive revenue and margin growth; new product launches in 2026 are expected to accelerate performance, targeting $200 to $300 in 2 to 3 years, and exceeding $500 in 10 years. AMD is seen to improve its profit rates and continuous revenue growth, margins, and operational gains prioritized for value appreciation.

🐻 AMD Bear Case
Fair Value: $180.10
The current price is about 40% above this narrative’s fair value.
Estimated Revenue Growth Rate: 16.5%
Although AMD is praised for its strong CPU and GPU innovations, intense competition from Nvidia, supply chain risks, and fluctuations in the gaming segment are seen to limit upside potential. It identifies momentum in the Data Center and Customer segments, but forecasts modest cyclical growth rates and considers the previous weaknesses of the Envelope and Gaming segments. AMD’s market share gains are regarded as valuable, but the current pricing is argued to be overvalued given achievable near-term profit growth.

Is there more to the story for Advanced Micro Devices? Share your insights by creating your own narrative!