Do China Headwinds Make AMD Stock A Sell?

Advanced Micro Devices (NASDAQ:AMD) stock looks relatively expensive at its current price of around $99. We believe there are some minor concerns with AMD stock, which makes the current valuation look slightly high, although there are multiple opportunities as well.

AMD just posted a stronger-than-expected set of Q1 results, and its outlook for Q2 was also better than expected.  Revenue rose by 36% to $7.44 billion for Q1, while earnings came in at $0.96 per share.  Growth was driven by strong data center sales, up 57% to $3.7 billion, driven by higher GPU and CPU shipments. AMD’s CPUs have been taking market share from Intel in the data center space for some time now. Although AMD’s GPU chips don’t match Nvidia’s chips at the high end, the AI boom is lifting the entire market, with new large-scale models like OpenAI’s GPT-4o and China’s DeepSeek R1 expected to drive broader demand for GPUs. AMD’s client segment saw revenue rise 68% to $2.3 billion. Overall, AMD expects new chips that will debut shortly to help boost sales in the second half of the year.

That said, China proves a problem for the company. AMD expects U.S. restrictions on sales to China will cost $1.5 billion in revenue this year due to export restrictions imposed in April targeting AMD’s MI308 chips. AMD also anticipates a charge of as much as $800 million related to inventory, purchase commitments, and reserves due to the new export controls. The new U.S. curbs on chips require it to obtain a license to ship advanced artificial-intelligence processors to China. AMD said it plans to apply for these export licenses, although it has cautioned that there is no assurance that the licenses would be granted. This is a headwind for the stock, as China accounts for roughly 24% of AMD’s revenue.

Now, our analysis of Advanced Micro Devices along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operating performance and financial condition, as detailed below, although its valuation is slightly on the higher side. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

How Does Advanced Micro Devices’ Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, AMD stock looks very expensive compared to the broader market.

• Advanced Micro Devices has a price-to-sales (P/S) ratio of 6.0 vs. a figure of 2.8 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 51.3 compared to 17.6 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 95.0 vs. the benchmark’s 24.5

How Have Advanced Micro Devices’ Revenues Grown Over Recent Years?

Advanced Micro Devices’ Revenues have grown considerably over recent years.

• Advanced Micro Devices has seen its top line grow at an average rate of 17.8% over the last 3 years (vs. increase of 6.2% for S&P 500)
• Its revenues have grown 13.7% from $23 Bil to $26 Bil in the last 12 months (vs. growth of 5.3% for S&P 500)
• Also, its quarterly revenues grew 24.2% to $7.7 Bil in the most recent quarter from $6.2 Bil a year ago (vs. 4.9% improvement for S&P 500)

How Profitable Is Advanced Micro Devices?

Advanced Micro Devices’ profit margins are much worse than most companies in the Trefis coverage universe.

• Advanced Micro Devices’ Operating Income over the last four quarters was $2.1 Bil, which represents a poor Operating Margin of 8.1% (vs. 13.1% for S&P 500)
• Advanced Micro Devices’ Operating Cash Flow (OCF) over this period was $3.0 Bil, pointing to a poor OCF Margin of 11.8% (vs. 15.7% for S&P 500)
• For the last four-quarter period, Advanced Micro Devices’ Net Income was $1.6 Bil – indicating a poor Net Income Margin of 6.4% (vs. 11.3% for S&P 500)

Does Advanced Micro Devices Look Financially Stable?

Advanced Micro Devices’ balance sheet looks strong.

• Advanced Micro Devices’ Debt figure was $2.2 Bil at the end of the most recent quarter, while its market capitalization is $160 Bil (as of 5/6/2025). This implies a very strong Debt-to-Equity Ratio of 1.4% (vs. 21.5% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $5.1 Bil of the $69 Bil in Total Assets for Advanced Micro Devices.  This yields a moderate Cash-to-Assets Ratio of 7.4% (vs. 15.0% for S&P 500)

How Resilient Is AMD Stock During A Downturn?

AMD stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on AMD stock? Our dashboard How Low Can Advanced Micro Devices Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

• AMD stock fell 65.4% from a high of $161.91 on 29 November 2021 to $55.94 on 14 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 18 January 2024
• Since then, the stock has increased to a high of $211.38 on 7 March 2024 and currently trades at around $99

Covid Pandemic (2020)

• AMD stock fell 34.3% from a high of $58.90 on 19 February 2020 to $38.71 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 22 July 2020

Global Financial Crisis (2008)

• AMD stock fell 91.2% from a high of $20.35 on 1 January 2007 to $1.80 on 25 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 21 August 2018

Putting All The Pieces Together: What It Means For AMD Stock

In summary, Advanced Micro Devices’ performance across the parameters detailed above are as follows:

• Growth: Extremely Strong
• Profitability: Very Weak
• Financial Stability: Very Strong
• Downturn Resilience: Very Weak
• Overall: Neutral

But given its extremely high valuation, the stock appears relatively expensive, which supports our conclusion that AMD is a expensive stock to buy.

The rich valuation of AMD stock limits its upside potential in the near-to-mid term. As an alternative, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates