Microchip designer Advanced Micro Devices (NASDAQ:AMD) is on a roll. The company is executing like a champion while arch-rival Intel (NASDAQ:INTC) experiences manufacturing issues, and AMD's products are in high demand during the COVID-19 pandemic. AMD's stock has surged 174% higher over the last 52 weeks, including a 77% gain in 2020 alone.

With raging returns like these, are AMD's golden days already behind it, or is the stock still a good investment?

A computer rendering of a rocket taking off from a laptop keyboard.

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Reasons to buy AMD today

AMD's market momentum looks just about unstoppable these days. It's bigger than the year-to-date and 52-week figures mentioned above, too. The stock has absolutely crushed the market over the last five years, leaving both Intel and graphics-chip competitor NVIDIA (NASDAQ:NVDA) far behind:

AMD Chart

AMD data by YCharts

These gains weren't pulled out of thin air, either. AMD is making inroads in several key markets, with notebook and server processors leading the way.

"I am very proud of the progress we have made over the last few years, placing AMD on a long-term growth trajectory," CEO Lisa Su said in AMD's second-quarter earnings call. "We remain focused on consistently gaining share across the $79 billion market for our high-performance products."

Intel's manufacturing hiccups are helping AMD achieve these goals. The chip giant is currently missing a unique business advantage that was a core driver of Intel's marketing message for decades. Traditionally, Intel was often the first company to explore a new manufacturing node on its in-house manufacturing lines. This year, Intel has started to use the same third-party manufacturing services as everybody else, removing a key selling point that normally sets Intel apart from AMD.

If AMD wants to strike while the iron is hot, the time is now. The balance of power is shifting in the computer processor industry, giving AMD a rare breath of fresh air.

Reasons to leave this stock alone

Everything I said above is true, but AMD investors have already baked all of these positive data points into the stock price.

The stock is trading at nosebleed valuations such as 164 times trailing earnings, 159 times free cash flow, and nearly 13 times sales. AMD is a relatively small company wearing the market cap of a much larger business.

And these smaller-scale operations actually give Intel and NVIDIA the upper hand over AMD in many ways. Take a look at AMD's trailing sales and cash profits in relation to its two largest rivals in recent years:

AMD Revenue (TTM) Chart

AMD Revenue (TTM) data by YCharts

One direct result of AMD's underdog status is that the company's research and development budget runs far behind the competition. AMD's capital expenses are also much smaller than Intel's or NVIDIA's, giving the larger rivals access to more reliable infrastructure.

Be careful out there

Long story short, I'm impressed by AMD's wins in recent years but the stock is priced for absolute perfection nowadays. It's a long way down to reasonable valuation ratios if AMD stumbles at any point, and the company is doing battle with one hand behind its back due to lower R&D budgets.

Buying AMD today is a direct bet on the company taking full advantage of Intel's manufacturing mishaps. AMD's wins will have to be absolutely awesome for years to come before the company can earn its way into these roomy share prices. That's not a bet I would be willing to make on this mountain peak. AMD's stock price is much too high and its competition is much too powerful.