Advanced Micro Devices (NASDAQ:AMD) stock appears relatively costly at its current valuation of approximately $99. We have identified some minor issues with AMD stock that make the present valuation seem a bit high, although there are numerous opportunities as well.
AMD recently released a set of Q1 results that surpassed expectations, and its outlook for Q2 was also more favorable than anticipated. Revenue increased by 36% to $7.44 billion in Q1, while earnings reached $0.96 per share. Growth was propelled by robust data center sales, which rose 57% to $3.7 billion, driven by a rise in GPU and CPU shipments. AMD’s CPUs have been capturing market share from Intel in the data center sector for quite some time. While AMD’s GPU chips do not match Nvidia’s chips at the premium level, the AI boom is stimulating the entire market, with emerging large-scale models like OpenAI’s GPT-4o and China’s DeepSeek R1 projected to generate increased demand for GPUs. AMD’s client segment experienced a revenue increase of 68% to $2.3 billion. Overall, AMD anticipates that new chips set to launch soon will aid in enhancing sales during the latter half of the year.
However, China presents a challenge for the company. AMD expects that U.S. restrictions on sales to China will result in a loss of $1.5 billion in revenue this year due to export restrictions imposed in April aimed at AMD’s MI308 chips. AMD also warns of a potential charge of up to $800 million linked to inventory, purchase commitments, and reserves due to the newly enforced export controls. The new U.S. restrictions on chip sales necessitate a license to ship advanced artificial intelligence processors to China. AMD stated that it intends to apply for these export licenses, but it has also warned that there is no guarantee that these licenses will be approved. This presents a headwind for the stock since China constitutes about 24% of AMD’s revenue.
Our evaluation of Advanced Micro Devices against key metrics of Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the company maintains a strong operational performance and financial health, as elaborated below, although its valuation is somewhat elevated. That being said, if you are looking for upside with less volatility than individual stocks, the Trefis High-Quality portfolio offers a viable alternative, having outperformed the S&P 500 and produced returns exceeding 91% since its inception.
How Does Advanced Micro Devices’ Valuation Look vs. The S&P 500?
When considering what you are paying per dollar of sales or profit, AMD stock appears very pricey compared to the overall market.
• Advanced Micro Devices has a price-to-sales (P/S) ratio of 6.0 compared to a figure of 2.8 for the S&P 500
• Furthermore, the company’s price-to-free cash flow (P/FCF) ratio stands at 51.3 in comparison to 17.6 for the S&P 500
• In addition, it has a price-to-earnings (P/E) ratio of 95.0 versus the benchmark’s 24.5
How Have Advanced Micro Devices’ Revenues Grown Over Recent Years?
Advanced Micro Devices’ Revenues have seen significant growth in recent years.
• Advanced Micro Devices has experienced its top line grow at an average rate of 17.8% over the past 3 years (compared to an increase of 6.2% for the S&P 500)
• Its revenues have grown 13.7% from $23 billion to $26 billion over the last 12 months (compared to growth of 5.3% for the S&P 500)
• Additionally, its quarterly revenues grew 24.2% to $7.7 billion in the most recent quarter compared to $6.2 billion a year ago (versus a 4.9% improvement for the S&P 500)
How Profitable Is Advanced Micro Devices?
Advanced Micro Devices’ profit margins are considerably worse than most companies within the Trefis coverage universe.
• Advanced Micro Devices’ Operating Income for the last four quarters was $2.1 billion, which signifies a poor Operating Margin of 8.1% (in contrast to 13.1% for the S&P 500)
• Advanced Micro Devices’ Operating Cash Flow (OCF) during this timeframe was $3.0 billion, indicative of a poor OCF Margin of 11.8% (versus 15.7% for the S&P 500)
• For the last four-quarter period, Advanced Micro Devices’ Net Income totaled $1.6 billion, which represents a poor Net Income Margin of 6.4% (while 11.3% for the S&P 500)
Does Advanced Micro Devices Look Financially Stable?
Advanced Micro Devices’ balance sheet appears solid.
• Advanced Micro Devices’ Debt figure was $2.2 billion at the close of the most recent quarter, while its market capitalization is $160 billion (as of 5/6/2025). This results in a very strong Debt-to-Equity Ratio of 1.4% (in comparison to 21.5% for the S&P 500). [Note: A lower Debt-to-Equity Ratio is preferable]
• Cash (inclusive of cash equivalents) accounts for $5.1 billion of the $69 billion in Total Assets for Advanced Micro Devices. This leads to a moderate Cash-to-Assets Ratio of 7.4% (compared to 15.0% for the S&P 500)
How Resilient Is AMD Stock During A Downturn?
AMD stock has performed worse than the benchmark S&P 500 index during several recent downturns. Concerned about the influence of a market crash on AMD stock? Our dashboard How Low Can Advanced Micro Devices Stock Go In A Market Crash? provides a comprehensive analysis of how the stock has behaved during and after prior market crashes.
Inflation Shock (2022)
• AMD stock declined 65.4% from a peak of $161.91 on 29 November 2021 to $55.94 on 14 October 2022, whereas the S&P 500 experienced a peak-to-trough drop of 25.4%
• The stock fully recovered to its pre-Crisis peak by 18 January 2024
• Since that time, the stock has risen to a maximum of $211.38 on 7 March 2024 and is currently trading at around $99
Covid Pandemic (2020)
• AMD stock decreased 34.3% from a height of $58.90 on 19 February 2020 to $38.71 on 16 March 2020, compared to a peak-to-trough reduction 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 dropped 91.2% from a high of $20.35 on 1 January 2007 to $1.80 on 25 November 2008, as opposed to 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 conclusion, Advanced Micro Devices’ performance across the various parameters elaborated above can be summarized as follows:
• Growth: Extremely Strong
• Profitability: Very Weak
• Financial Stability: Very Strong
• Downturn Resilience: Very Weak
• Overall: Neutral
However, given its extremely high valuation, the stock appears relatively pricey, which reinforces our assertion that AMD is a costly stock to purchase.
The elevated valuation of AMD stock restricts its upside potential in the near- to mid-term. Alternatively, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (the combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to deliver impressive returns for investors. What accounts for this? The quarterly rebalanced blend of large-, mid-, and small-cap RV Portfolio stocks offered a responsive approach to capitalize on favorable market conditions while mitigating losses when markets take a downturn, as outlined in RV Portfolio performance metrics.