Advanced Micro Devices (AMD) recently announced a high-profile partnership with Microsoft (MSFT) to collaboratively create silicon for a wide range of devices, including the next Xbox console. As the gaming hardware sector slowed down in recent quarters, this news represents a strategic wager that there will be strong demand down the road for new gaming solutions and customized AI-specific workloads. AMD shares are now higher by more than 9% over the previous five trading days.

Beyond gaming, the AI chip space remains a large tailwind. Despite import controls and a cautious macroeconomic picture, AMD continues to gain traction in hyperscale data center, client, and custom silicon partnerships. The partnership with Microsoft reestablishes AMD’s relevance in a more fragmented chip market and adds a fresh catalyst to a name that has lagged behind other AI stocks.

About AMD Stock

Advanced Micro Devices (AMD) is a global leader in semiconductors based in Santa Clara, California. The company designs CPU, GPU, and adaptive SoCs for data center, PC, gaming console, and embedded markets. AMD is valued at over $205 billion and competes fiercely with Intel (INTC) and Nvidia (NVDA).

AMD shares are down 20% over the past 52 weeks and are more than 40% off record highs. However, things could soon start turning around, with shares up 20% in the last three months. 

Valuation-wise, AMD trades at a forward price-earnings multiple of 40.1x and a price-sales multiple of 7.99x. These are high figures relative to its history but are within range for its large-cap AI hardware peers. The PEG ratio of 1.64x for AMD suggests that the stock is fairly valued relative to growth, but sustained execution, especially in high-margin AI areas, will be required to justify a premium. 

AMD Beats on Earnings

AMD's first quarter 2025 results exceeded expectations across the board. The company generated revenue of $7.44 billion, 36% higher year-over-year, and non-GAAP EPS of $0.96 trounced consensus by a wide margin.

For the coming quarter, management predicted Q2 revenue of $7.4 billion, minus or plus $300 million, and non-GAAP gross margin to be 43%. The latter reflects a $800 million charge related to fresh export restrictions, without which, margin expectations would have been 54%. 

Segment by segment, data center revenue increased 57% year over year to $3.7 billion due to strong EPYC CPU and Instinct GPU demand. Client segment revenue increased 68% to $2.3 billion with strong Ryzen processor sales. Gaming revenue decreased 30% to $647 million due to lowered semi-custom sales. 

What Do Analysts Expect for AMD Stock?

According to Barchart, there is currently a “Moderate Buy” consensus rating among 42 analysts for AMD. 28 of them rank it a “Strong Buy,” one ranks it a “Moderate Buy,” and 13 rank it “Hold.” AMD’s consensus price target is $133.32, translating to around 4% upside potential from its current price. The most bullish and bearish targets are $200 with 56.3% of upside and $95 with 25.8% of downside risk. The wide range reflects varied perceptions of AMD’s AI momentum vis-a-vis execution risks, particularly margin squeeze and global regulatory challenges.