Why AMD Stock Rallied 20% Over The Past Month?

Advanced Micro Devices stock (NASDAQ:AMD) surged by over 4% in Tuesday’s trading and remains up by close to 20% over the past month. So what’s driving the stock higher?

New $10 Billion Deal In Saudi Arabia

On Tuesday, AMD announced a $10 billion deal with Humain, a Saudi-based startup backed by Saudi Arabia’s sovereign fund. Humain will buy CPUs, GPUs, and software from AMD to build out data centers and AI infrastructure. Overall, Humain is expected to build data centers with about 1.9 gigawatts of power capacity by 2030. Notably, Humain says that the deal with AMD is to ensure it isn’t locked into using a single vendor for AI-related hardware. This commentary is a positive for AMD stock, as we have indicated that customers diversifying their sourcing away from Nvidia in itself provides an opportunity, given the fast-growing AI market. Moreover, so-called sovereign AI, which essentially state-sponsored initiatives for AI capabilities, is a market increasingly targeted by semiconductor firms as they look to diversify away from a key customer list currently dominated by U.S. big-tech firms like Amazon, Google, and Microsoft. It’s a positive that AMD is winning deals here as well.

AMD’s Strong Q1 Earnings

AMD’s Q1 results were also better than expected, with its outlook for Q2 also coming in ahead of estimates.  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. With the company winning new GPU and AI datacenter deals, and the customers looking to diversify their sourcing of chips, AMD stands to benefit.

China Issues May Ease

Earlier this month, AMD noted that new U.S. export restrictions targeting its MI308 AI chips could reduce its 2025 revenue by $1.5 billion. The company also indicated that it could take a charge of up to $800 million related to inventory, purchase commitments, and reserves tied to these curbs. Under the new rules, AMD must obtain a license to ship advanced AI processors to China. This was seen as a setback, given that China accounts for about 24% of its revenue. That said, there appears to be a silver lining. U.S.-China trade tensions appear to be easing, with both countries suspending triple-digit tariffs for the next 90 days and making progress in talks over the last weekend. This raises hopes that chip export restrictions could potentially be relaxed shortly.

AMD Stock’s Volatility

The increase in AMD stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 57% in 2021, -55% in 2022, 128% in 2023, and -18% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could AMD face a similar situation as it did in 2022 and 2024 and underperform the S&P over the next 12 months, or will it see a strong jump?

We value AMD stock at about $107 per share, which is roughly in line with the current market price. See our analysis on AMD Valuation: Is AMD Stock Expensive Or Cheap? for more details on AMD’s valuation and how it compares with peers.

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