What happened

Shares of chipmaker Advanced Micro Devices (NASDAQ:AMD) rose 31.7% last month, according to data provided by S&P Global Market Intelligence. The gains last month bring AMD's year-to-date stock performance to a market-beating 64%.

Coming off another strong earnings report in late October, AMD gave investors more reasons to be bullish on its prospects with an investor presentation in early November. During that presentation, CEO Lisa Su announced that Facebook parent Meta Platforms had chosen AMD's EPYC processors to power its data centers. 

A lab worker holding up a silicon wafer used to make computer chips.

Image source: Getty Images.

So what

Facebook is the newest partner for AMD, which supplies EPYC processors for top cloud providers, including Microsoft and Alphabet, and the servers behind Netflix's streaming service.

AMD's stock price has delivered incredible returns for investors over the last few years, but a key reason for that has been the competitive pressure AMD has put on market-share leader Intel (NASDAQ:INTC), which has historically dominated the CPU market. In September, Omdia's data-center market report showed that AMD had captured a "historic-best" 16% of the server CPU market. The Facebook deal should lead to further gains in market share for AMD.

Now what

AMD's third-quarter earnings report showed impressive revenue growth of 54% over the same quarter last year. More impressive was the 134% jump in earnings per share, driven by sales of higher-margin chips, such as EPYC, Ryzen, and Radeon processors. 

The only drawback about all this is that the stock's performance has pushed AMD's price-to-earnings ratio to 55 times this year's full-year earnings estimates. Investors are paying a higher premium to own shares of AMD, but future growth is not certain, given Intel's plan under new CEO Pat Gelsinger to retake the throne in the chip industry. 

AMD Chart

AMD data by YCharts

The semiconductor industry is not immune from recessions or competitive dynamics that could pressure AMD's revenue growth. In this regard, investors should keep an eye on Intel's moves. Under Gelsinger, Chipzilla is investing to expand its manufacturing capabilities to recapture chip leadership. 

The good news for AMD is that Intel can't change its fortunes with the flip of a switch. It will take time for Intel to catch up, which leaves AMD in growth mode for now.

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.