Is AMD Stock Priced Right Against Its Chip Peers?
Advanced Micro Devices (AMD) stock returned 291% over the past year, the best of five big chipmakers. It is also the priciest on earnings of the four with a comparable multiple, yet it keeps the lowest operating margin. Is AMD growing fast enough and getting more profitable fast enough to earn that price?
AMD’s Growth Alone Does Not Earn That Price
AMD’s sales growth is strong, but it cannot explain the price on its own. Revenue rose 40% over the past twelve months, second best in the group. NVIDIA grew faster, at 83%.
NVIDIA also costs far less, at 28.1 times the past year’s earnings, against 116.6 times for AMD. NVIDIA keeps 65% of its sales as operating profit. AMD keeps 15.7%. So each dollar of AMD’s earnings costs you about four times what NVIDIA’s does.
| AMD | NVDA | AVGO | QCOM | MRVL | |
|---|---|---|---|---|---|
| Market Cap ($ Bil) | 750.1 | 5,428.5 | 1,754.9 | 176.1 | 232.4 |
| PE Ratio | 116.6 | 28.1 | 59.9 | 19.0 | 88.0 |
| LTM Revenue Growth | 39.5% | 83.4% | 32.3% | 1.9% | 30.6% |
| LTM Operating Margin | 15.7% | 65.2% | 44.1% | 23.3% | 16.8% |
| 12M Stock Return | 291.1% | 26.2% | 4.1% | 17.0% | 247.8% |
Broadcom and Marvell are both cheaper than AMD, and both grow more slowly. Against them, AMD’s higher price has growth to point to. Qualcomm’s multiple is not comparable, because its earnings include a loss quarter.
In the second quarter of 2026, AMD’s fastest-growing business was its data center unit, which sells processors and AI chips for servers. Its revenue more than doubled from a year earlier to $6.7 billion. The unit now makes up 58% of sales, management said. Sales growth is the part of what the price asks that AMD already delivers. Profit per sales dollar is where it trails its peers.
Is AMD Keeping More Of Each Sales Dollar?
AMD’s operating margin is rising quickly, though from last place in the group. Three years ago, AMD lost money on its operations. The margin has risen every year since. It was 8.3% a year ago.
Gross margin, the share of sales left after the cost of making the chips, reached 56% in the second quarter. Management credited a richer product mix and a growing data center business.
Operating expenses rose 40% from a year earlier, as AMD invested in AI chips, systems, and software, while second-quarter sales rose 50%. Management said it will keep expense growth below sales growth. Its forecast for the third quarter of 2026 shows how much margin it expects to keep.
Management Guides For Fast Growth, Flat Gross Margin
Management expects fast growth and a flat gross margin. It guided third-quarter revenue to about $13 billion, plus or minus $300 million. At the midpoint, that is 41% more than a year earlier. It expects adjusted gross margin to stay at about the second quarter’s level.
Management also expects data center revenue to more than double in 2027. Two risks stand out. Management is planning for a softer PC market as memory costs rise. Server CPU supply was also tight in the first half of 2026.
AMD’s price-to-earnings multiple looks backward. It uses a year of profits earned at thinner margins. Second-quarter earnings per share rose about 82%, far faster than sales, when management leaves out charges it took a year earlier. If profits keep growing near that pace, the multiple falls quickly at today’s price. If the operating margin stalls, the price has only sales growth to point to, and NVIDIA already grows faster.
The price appears to assume that AMD keeps growing near the top of its group while its operating margin keeps rising. Sales growth is holding up so far. Profitability is the weaker half: it is rising, but still the lowest of the five. In AMD’s third-quarter report, you want gross margin at the guided level, with expenses growing slower than sales.
How To Act On AMD?
