What happened

Shares of Advanced Micro Devices (NASDAQ:AMD) rose 37.3% in August 2018, according to data from S&P Global Market Intelligence. The rally was started by a glowing analyst note, and the good times kept rolling when the chip designer unveiled a new high-powered graphics card aimed at data center visualization number-crunching.

So what

After hosting a series of institutional investor meetings with AMD's management, analyst firm Rosenblatt raised its price target on the stock from $27 to a Street-high $30 per share. Rosenblatt analyst Hans Mosesmann professed a "renewed conviction" in AMD's long-term growth plans, supported by rising investor interest in the company and its stock.

A few days later, AMD introduced the Radeon Pro V340 graphics card, featuring not one but two of the company's next-generation Vega graphics cores and a massive 32 gigabytes of memory. AMD is marketing this card as an accelerated platform for cloud computing environments and other uses of many concurrent virtual machines. The stock closed more than 5% higher the next day.

A technician is using a suction tool to hold up an uncut semiconductor wafer.

Image source: Getty Images.

Now what

The combination of a quick analyst boost and a promising product announcement added up to a 37% surge last month and share prices have soared more than 160% above the lows of late April. Investors were getting nervous about the fading value proposition of cryptocurrency mining, but AMD keeps delivering strong results even without that particular catalyst.

I find it hard to embrace AMD's stock at nosebleed valuation ratios such as 40 times forward earnings and 132 times trailing free cash flows. The company is doing very well at the moment but the slightest misstep could bring down this house of graphics cards in a hurry. It's probably best to watch AMD's stock from the sidelines these days.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.