Advanced Micro Devices (NASDAQ:AMD) has been on a roll over the last year, taking market share away from companies that have vastly more resources than it does. It's gaining share on Intel (NASDAQ:INTC) in both the PC and data-center markets. Also, AMD has made major strides against its rival NVIDIA (NASDAQ:NVDA) in the discrete graphics card market. The shares have delivered an incredible gain of 1,300% over the last three years. 

However, the (million-dollar) question is: Will AMD continue making inroads, or will its rivals dash its hopes in the end? Let's take a look.

AMD graphics processing unit.


How AMD is winning market share

AMD's latest quarter reveals a company on fire. After growing revenue 23% in 2017, the company reported a blowout second quarter in which revenue grew 53% year over year. That performance has the company on track to generate $0.47 in non-GAAP earnings per share this year, according to analysts' estimates. 

Up to this point, Intel's server processors have dominated the fast-growing data-center market with 99% share. Over the last year, Intel generated $21 billion from its data-center group. However, AMD was able to grab 1% share in the second quarter with its EPYC server chips, which management claims are faster than Intel's Xeon server chips. 

This might just be the beginning for AMD. The company has a golden opportunity to capitalize on Intel's production delays of its 10-nanometer chips. AMD's management believes they are on track to reach mid-single-digit share of the server market by the end of the year. There could be further gains once its 7-nanometer server chip launches in 2019. 

Intel is bracing for potentially bigger losses to its smaller rival. If that happened, it could potentially be game-changing for AMD. Mercury Research estimated that AMD generated over $50 million in revenue from sales of its EPYC server chips in the last quarter, and that was just for reaching a 1% share of the server market. Long term, AMD estimates its addressable market in data center to be $25 billion. 

Potential hiccups

The only short-term speed bump in AMD's path is NVIDIA. AMD has made big gains against its GPU rival that saw NVIDIA's share of the discrete add-in board market fall to 63% from as high as 72.5% last year. But AMD may have seen its peak.

First, cryptocurrency demand contributed about 10% to AMD's first-quarter revenue, but that demand started to fade in the second quarter. While AMD's computing and graphics segment still posted a 64% year-over-year increase in revenue, there was a slight decline sequentially due to lower GPU revenue sold to the blockchain market.

Second, NVIDIA just launched its Turing RTX graphics cards, which gives NVIDIA a very competitive GPU lineup. NVIDIA's previous-generation cards, such as the GTX 1080 Ti and GTX 1080, were already comparable to the most powerful AMD Radeon cards, but the introduction of Turing may cause the prices of NVIDIA's older cards to fall, as new technology typically does. This could significantly shift the value proposition in NVIDIA's favor and allow it to regain share.

Will AMD make you a million bucks?

Since Intel's delay issues surfaced, AMD's stock price has shot up nearly 200% just since April of this year. Investors are buying the shares on hopes that the company's recent success is sustainable.

There's a debate as to how much of this growth is already factored into the current valuation. AMD currently trades for a price-to-earnings multiple of 40 times expected earnings next year. The company will certainly have to maintain high growth rates to justify its valuation.

However, AMD may not have to actually gain more share against well-financed rivals to keep growing. Management estimates its total addressable market across all segments and products at $86 billion. This encompasses big opportunities not only in computing and data center, but automotive and inference technology, and machine-learning applications, too.

It's important to note that while AMD has gained share against its competitors, Intel and NVIDIA have also been growing their revenue at fast rates as well. This implies a huge computing revolution affecting several industries that is lifting all boats.

There are definitely risks here, but considering AMD's massive long-term upside across data center, gaming, medical imaging, and the Internet of Things, AMD could certainly be a millionaire stock.

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.