Own AMD stock? This Is the 1 Thing to Watch Now.
Key Takeaways
The stock could double in three years if AMD executes in this one area.
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Quick insights and key information
5 min read
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investment
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July 27, 2025
04:15 AM
The Motley Fool
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S of Advanced Micro Devices (AMD 2. 71%) have surged 81% over the last three months (which is quite significant)
For holders, the stock's rebound is encouraging ing the underperformance in 2024, while its larger rival Nvidia outperformed, given current economic conditions
Nvidia has dominated the market for data center chips
However, AMD has seen strong growth for its MI300 series of graphics cessing units (GPUs) for data centers, but it's got a lot of work to do if it's going to catch the leader
Wall Street is betting on AMD to show strong earnings growth over the next year as it continues to expand its data center offering (something worth watching)
On the other hand, Despite Nvidia's commanding lead, both stocks are currently trading at the same forward price-to-earnings (P/E) multiple of 39 in the last week of July, given current economic conditions
To justify more highs for AMD s, investors are going to want to closely monitor its data center growth, as this is the key catalyst for AMD to expand its margins, grow earnings, and der more gains for holders
Additionally, Let's look at AMD's strategy to tackle this multibillion-dollar opportunity, and how it could benefit the stock over the next few years (remarkable data)
Image source: Getty Images (this bears monitoring)
AMD's data center growth AMD estimates the data center market for artificial intelligence (AI) accelerators to exceed $500 billion by 2028
This represents annualized growth of more than 60%, driven by the shift in AI workloads from training to inference, where computer models are smart enough to make predictions from new data in real time
One glaring issue for AMD is that Nvidia already vides just everything needed to build AI factories, including software, networking, and hardware, and that has made Nvidia the preferred choice for AI reers
On a trailing-12-month basis, Nvidia's data center revenue doubled to more than $131 billion
By comparison, AMD's trailing data center revenue grew 84% year over year to $13, amid market uncertainty
Nvidia holds a large of the data center market, but it doesn't control 100% of it, in light of current trends
There's growing demand for cost-effective alternatives to counter the steep prices of Nvidia's chips
Even though Nvidia has led the GPU market for 20 years, AMD has dered incredible returns to holders by offering GPUs with a better cost-performance ratio
Conversely, AMD is starting to put together a differentiated set of chip solutions for data centers
Its acquisition of Xilinx a few years ago brought over industry-leading field grammable gate arrays (FPGAs) that can be customized for specialized workloads in data centers, such as network security and medical re
Amazon has been a major buyer of AMD's FPGAs for its cloud (remarkable data), given current economic conditions
AMD has made investments to widen its offering in recent years, which could start to pay off
The 2022 acquisition of Pensando Systems expanded its chip lineup to data cessing units (DPUs), while its most recent acquisition of ZT Systems brought in 1,200 skilled engineers to design more comprehensive computing systems for data centers
AMD ly sees an opportunity to grow its data center significantly in the coming years, and if successful, it could send the stock soaring
Moreover, Will AMD keep up with Nvidia (something worth watching)
AMD is making the strategic moves to position itself for growth, but investors shouldn't take anything for granted, given current economic conditions
Nvidia's data center has expanded more rapidly than AMD, and this is creating a widening gap between the two companies' data center segments (which is quite significant)
In contrast, In 2023, Nvidia's data center revenue was more than 7 times larger than AMD's, and today, Nvidia is nearly 10 times bigger
However, AMD is the only alternative to Nvidia in the GPU market, in this volatile climate
AMD's with Amazon and other data center operators put it in a solid position for more growth, and the best part is that AMD is currently generating much lower margins than other semiconductor companies (fascinating analysis), in today's financial world
Additionally, It stands to significantly expand margins as it ramps up new chips for the data center market
In contrast, Analysts expect AMD's total revenue to reach $44 billion by 2027, with earnings per growing 30% annually to reach $7. 12, compared to 29% annualized earnings growth for Nvidia
Moreover, That's enough earnings growth for the price to double within the next three years (fascinating analysis)
Additionally, The analysis reveals comparable earnings growth spects are why investors are paying roughly the same forward P/E for both stocks right now
Nvidia is the leader and is growing its data center revenue faster, so AMD will have to execute in a highly competitive semiconductor industry, in today's financial world
Nevertheless, Meanwhile, If AMD can meet analyst expectations, the stock offers significant upside over the next few years
Additionally, Investors will want to closely watch its data center segment to justify its valuation.
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