Advanced Micro Devices stock appears relatively expensive, making it a costly investment at its current price of around $93. We believe there are some minor issues with AMD stock that contribute to its high valuation.
The surge in generative AI has fueled strong GPU demand, but AMD’s AI accelerator segment has fallen short of expectations. In Q4, AMD’s data center revenue—a key indicator of its AI chip performance—was $3.9 billion, missing consensus estimates. The company also issued a soft outlook, noting that current-quarter data center sales may decline 7% sequentially. Former President Donald Trump’s trade policies could also pose risks to companies like AMD. While there is limited clarity on the semiconductor tariffs due to inconsistent messaging from the White House, the threat remains for AMD, as it sources most of its chips from Taiwan and other parts of Asia. Additionally, AMD has a thinner margin buffer to withstand tariffs compared to competitors like Nvidia due to its lower gross margins.
Our assessment of Advanced Micro Devices using key parameters like Growth, Profitability, Financial Stability, and Downturn Resilience shows the company is strong operationally and financially, despite its rich valuation. For those seeking returns with less volatility than individual stocks, the Trefis High-Quality portfolio offers an alternative—it has outpaced the S&P 500 and delivered over 91% returns since inception.
How Does Advanced Micro Devices’ Valuation Compare With The S&P 500?
Relative to sales and profit, AMD stock appears quite expensive compared to the broader market.
• AMD has a price-to-sales (P/S) ratio of 5.6 versus 2.8 for the S&P 500
• Its price-to-operating income (P/EBIT) is 69.0 vs. 21.3 for the S&P 500
• The price-to-earnings (P/E) ratio stands at 87.7 compared to 21.3 for the benchmark
How Have Advanced Micro Devices’ Revenues Trended Recently?
Advanced Micro Devices’ Revenues have grown significantly in recent years.
• The company has recorded an average revenue growth of 17.8% over the past 3 years (vs. 6.2% for the S&P 500)
• Revenues have increased 13.7% from $23 Bil to $26 Bil in the past 12 months (vs. 5.3% growth for the S&P 500)
• Its latest quarterly revenue rose 24.2% to $7.7 Bil from $6.2 Bil a year ago (vs. 4.9% growth for the S&P 500)
How Profitable Is AMD?
AMD’s profit margins lag behind most firms covered by Trefis.
• Operating Income over the last four quarters was $2.1 Bil, reflecting a low Operating Margin of 8.1% (vs. 13.1% for S&P 500)
• Operating Cash Flow was $3.0 Bil, implying a moderate OCF-to-Sales Ratio of 11.8% (vs. 15.7% for S&P 500)
Is AMD Financially Sound?
AMD’s balance sheet appears robust.
• The company had $2.2 Bil in debt at the end of the latest quarter versus a $152 Bil market cap (as of 4/11/2025), resulting in a very low Debt-to-Equity Ratio of 1.5% (vs. 21.5% for S&P 500) [Note: Lower is better]
• With $5.1 Bil in cash among $69 Bil in total assets, AMD has a moderate Cash-to-Assets Ratio of 7.4% (vs. 15.0% for S&P 500)
How Has AMD Stock Performed During Downturns?
AMD has underperformed the S&P 500 during several past downturns. Concerned about a crash? Check out our dashboard How Low Can Advanced Micro Devices Stock Go In A Market Crash? and see detailed comparisons to past market crashes.
Inflation Shock (2022)
• Stock fell 65.4% from $161.91 (Nov 29, 2021) to $55.94 (Oct 14, 2022), while S&P 500 declined 25.4%
• Fully recovered to prior peak by Jan 18, 2024
• Rose to $211.38 on Mar 7, 2024, and now trades at ~$93
Covid Pandemic (2020)
• Dropped 34.3% from $58.90 (Feb 19) to $38.71 (Mar 16), nearly matching S&P 500’s 33.9% drop
• Recovered to pre-crisis level by Jul 22, 2020
Global Financial Crisis (2008)
• Plunged 91.2% from $20.35 (Jan 2007) to $1.80 (Nov 2008), vs. S&P 500’s 56.8% drop
• Recovered by Aug 21, 2018
Bottom Line: What Does This Mean For AMD Stock?
Here’s how AMD fares across key metrics:
• Growth: Extremely Strong
• Profitability: Weak
• Financial Stability: Very Strong
• Downturn Resilience: Very Weak
• Overall: Neutral
Given its lofty valuation, AMD stock looks relatively expensive, which aligns with our conclusion that it is currently not an ideal buy.
The high valuation restricts upside in the near to mid-term. Instead, consider the Trefis Reinforced Value Portfolio, which has outperformed a combined all-cap index benchmark. Why? Its quarterly-rebalanced mix of large-, mid-, and small-cap stocks helps capture gains in strong markets while limiting losses in downturns, as shown in the RV Portfolio performance metrics.
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