AMD Stock’s Big AI Opportunity Is Taking Shape
Advanced Micro Devices stock (NASDAQ:AMD) was up nearly 7% in Tuesday trading and about 15% year-to-date, as investor confidence builds around its positioning in the AI chip market with multiple analysts upping their price estimates for the stock. So what exactly has changed in recent months for AMD? The AI semiconductor space is massive and is still expanding quickly. Nvidia dominates the market and has more than doubled its revenue in each of the past two years, with the data center GPU market surpassing $100 billion per year. But AMD doesn’t need to dethrone Nvidia to boost its stock further – it just needs to sell more GPUs, and an opportunity may be opening up.
AI Market Will Evolve
Over the last three years, the AI market has been in a phase where big tech companies and hyperscalers have been investing big to develop the best frontier AI models. These companies have prioritized performance and training speed, since training large language models requires enormous computational resources. This has benefited Nvidia, which makes the best chips in the market and has a hardware and software ecosystem that is well entrenched with big cloud providers. However, there is a real possibility that rapid performance improvements of frontier AI models will eventually plateau. A larger mix of AI workloads will shift to inference – essentially using the built models in real world applications – where efficiency and cost matter more than brute force computing power.
This could prove an opening for AMD. Not all organizations need or can afford Nvidia’s top-tier GPUs. Many are likely to opt for older Nvidia chips or cost-effective alternatives like AMD’s MI series, which offer a decent amount of memory and solid performance for inference and fine-tuning of models. Moreover, open-source models such as Llama by Meta could open the door for more companies to run their AI workloads on-premises, reducing reliance on expensive cloud computing fees. This might also play to AMD’s advantage. Separately, Intel is looking to make a comeback Can Intel’s 18A Break TSMC’s 2nm Stronghold?
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AMD’s Recent AI Progress
At its AI Day, AMD unveiled its MI350 series, launching in the second half of 2025, which it says will deliver 4x the AI compute performance of its predecessor. The company also previewed its MI400 and MI450 chips, continuing its advancing product roadmap. Beyond hardware, AMD is building out its AI software and systems stack, positioning itself as a full-stack AI provider – via its acquisitions of Brium, which is focused on compiler and AI software optimization, and Enosemi, specializing in silicon photonics. These moves could also strengthen AMD’s ROCm software stack, which takes an open-source, standards-based approach, a contrast to Nvidia’s proprietary CUDA ecosystem.
This could appeal to enterprises looking for flexibility and lower cost in deploying AI at scale. AMD recently indicated that it had partnered with Oracle to make its MI355X GPUs via Oracle Cloud Infrastructure, offering over 2x better price-performance than previous generations for large-scale AI workloads including inferencing. That said, risks remain. Cloud providers like Google and Amazon are developing their own custom AI chips, which could limit long-term demand for third-party hardware solutions. Nvidia, too, could double down on more efficient mid-tier chips as the market evolves toward inferencing. 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.
The strong upmove in AMD stock could limit its 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.
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