Advanced Micro Devices climbed 13.3% this week after a first-quarter report that showed its data center business growing faster than the rest of the company. AMD said overall revenue rose 38% to $10.25 billion, while data center sales jumped 57% to $5.8 billion.
The market liked the proof that AMD is still winning business in AI infrastructure, where demand has become the central driver for chip makers. AMD has signed numerous deals with hyperscaler AI companies, and on its conference call it said it secured contracts across its supply chain. The company also said it expects revenue growth of 46% in the second quarter.
That puts AMD in a spot many investors have been waiting for since the AI trade took off. The company sells chips for data centers and personal computing devices, but the data center division is now doing the heavy lifting. AMD has described the second half of this year as a key period, saying it has a partnership with Meta Platforms to deploy one gigawatt of supply.
The trouble is valuation. AMD trades at a price-to-sales ratio of 18 and a price-to-earnings ratio of 134, with a market value of $660 billion. Those are numbers that leave little room for disappointment, even after a strong quarter. The Motley Fool argued gains may already be priced into the stock, and its Stock Advisor analyst team named 10 best stocks for investors to buy now without putting AMD on the list.
For now, the message from the quarter is straightforward: AI has changed the game for AMD, and the stock is being treated like a company that can keep growing at a blistering pace. The next test is whether those contracts, supply commitments and the Meta deployment translate into results fast enough to justify where amd stocks already trade.