AMD’s AI Advantage May Just Be Getting Started

While the spotlight often shines brightest on Nvidia, another chipmaker has been clawing its way into the conversation and could soon be in a position to steal the show.

That company is Advanced Micro Devices (NASDAQ: AMD), and it’s gearing up to report second-quarter earnings early next month.

With the stock already up 34% this year, the question isn’t just whether AMD will post strong numbers and is the upside already priced in?

Key Points

• AMD is rapidly closing the AI chip gap with Nvidia, with its new MI355X and upcoming MI400 GPUs gaining traction from major customers.

• Its Ryzen AI chips position AMD to lead in on-device AI computing, as PCs shift toward running AI locally.

• While the stock isn’t cheap short-term, long-term upside remains, with forward earnings estimates suggesting a reasonable valuation.

Chasing Nvidia? More Like Closing the Gap

For years, Nvidia (NASDAQ: NVDA) has had a stranglehold on the data center GPU market. The NVDA H100 chip practically became the default silicon for AI training a couple of years ago, helping the company snag a reported 98% share of the AI data center market.

AMD arrived late to the game with the MI300X, but don’t confuse late for irrelevant. That chip got immediate traction. Oracle, Meta, and Microsoft, three of Nvidia’s marquee customers, placed meaningful orders with AMD.

The Rise of On-Device AI

While Wall Street watches the data center GPU arms race, there’s another massive shift brewing, and it’s playing right into AMD’s hands, the move toward AI at the edge.

AMD’s Ryzen AI 300 series chips are built to run AI workloads directly on personal computers.

These aren’t your standard laptop processors. Each chip integrates a CPU, GPU, and neural processing unit, allowing devices to handle AI tasks locally without relying on an internet connection.

Running AI locally means faster responses, more privacy, and potentially massive cost savings for companies deploying AI at scale. Imagine a video editing tool that can generate scenes or transcribe dialogue in real time, all offline. That’s what’s now possible.

Asus, HP, and Dell have already signed on to incorporate these chips into new devices. And Apple’s recent push toward on-device AI in its M-series chips shows that the tide is shifting across the industry. AMD is simply better positioned than most realize to ride that wave.

A Closer Look at AMD’s Numbers — and What They Really Say

In Q1 2025, AMD posted over $7 billion in revenues, up by more than a third year over year.

But the real story was in the breakout of that revenue because data Center chips brought in $3.7 billion and the Client segment, which includes Ryzen AI chips, generated $2.3 billion.

That’s important because it shows AMD’s two most AI-exposed business units are growing the fastest and now account for about four fifths of total revenue.

Guidance for Q2 calls for revenue between $7.1 billion and $7.7 billion. And that’s after subtracting an estimated $700 million hit from new U.S. export restrictions to China. If not for those restrictions, Q2 might have shown even more acceleration.

What about the lagging areas? Gaming and embedded chips remain soft spots. Console sales for PlayStation 5 and Xbox have slowed, and industrial chip demand is still sluggish. But management has said they expect a return to growth in the embedded segment in the second half of the year.

Is It Too Late to Buy?

AMD isn’t cheap but it’s also not absurdly priced given the potential.

As of today, AMD trades lower than Nvidia’s 55x earnings, but Nvidia is also growing faster. So short-term traders looking for a quick pop after earnings might want to temper expectations.

However, looking out to 2026, analysts expect AMD to earn nearly $6 per share. That implies a forward price-to-earnings ratio of just over 27x, much more palatable for a company entrenched in two of the fastest-growing areas in tech.

And if AMD’s MI400 chips match Nvidia’s Rubin platform next year, or even come close, it will be the first time in years the playing field is level in the data center. That could catalyze a wave of customer diversification away from Nvidia, opening the floodgates for AMD’s share gains.

Is AMD a Buy Before Earnings?

If you’re trading on headlines, AMD might be a coin toss ahead of earnings. But if you’re thinking like a business owner, and willing to hold for the long haul, AMD looks like a smart bet.

The company is no longer playing catch-up in AI. It’s building momentum in the data center, pioneering AI on the PC, and delivering strong growth despite geopolitical headwinds.

With multiple product launches ahead and demand for AI accelerating, AMD could be one of the best underappreciated ways to ride the next phase of the AI revolution.

So no, the good news isn’t all priced in. Not even close.