Image source: Advanced Micro Devices, Inc.

What happened

Shares of Advanced Micro Devices Inc. (NASDAQ:AMD) rose 27.3% in the month of December, according to data provided by S&P Global Market Intelligence, continuing its stellar climb on encouraging rumors and as analysts continued to express optimism for shares of the graphics chip specialist.

So what

For perspective, AMD stock climbed more than 300% when all was said and done in 2016, including a 23% rise in November after the company announced its Radeon GPU technology will be available to Google Cloud Platform users starting in 2017.

But shares began their December rise early in the month after rumors surfaced that AMD has struck a deal with Intel to license its Radeon graphics technology. If this rumor proves true, Intel is apparently planning to integrate that technology into its future processors.

Two days later, analysts at Merrill Lynch upgraded AMD stock to "buy" from "underperform," effectively reversing a negative call made more than two years ago and admitting they missed out on AMD's stunning turnaround. Analysts at Mizuho Securities followed suit two weeks later, citing significant opportunities for gross margin expansion given incremental revenue from deep learning application wins for AMD's ProGFx, Ryzen, and Zen chips.

Now what

I'm a firm proponent of the idea that winners keep on winning, so it's no surprise to see Wall Street analysts offering their respective votes of confidence as AMD executes its ongoing business turnaround. If AMD can indeed improve its gross margin in the coming year while identifying additional compelling growth industries to put its flagship GPU technology to work, it will be equally unsurprising to see AMD stock keep delivering market-beating returns going forward.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.