If you own a smartphone, car, or even a fridge, chances are it's powered by one or more semiconductors, more casually known as computer chips. These components are critical to the manufacturing of modern, digitally capable products, and the industry could be on its way to a $1.5 trillion annual value by 2030.

Advanced Micro Devices (AMD 10.70%) is a best-in-class chip producer, and its hardware is constantly in demand from some of the largest companies in the world. 

One Wall Street investment firm thinks AMD stock could soar by 104% from its current price, and the company's financial results for the second quarter of 2022 (reported Aug. 2) were a positive step toward delivering that hefty gain.

A digital rendering of a computer chip being plugged into a circuit board.

Image source: Getty Images.

AMD's big-time acquisition of Xilinx has shaken things up

AMD has generally reported its revenue under two main business segments, but to accommodate its recent $49 billion acquisition of adaptive computing leader Xilinx, the company has made some key changes, which went into effect in its second-quarter financials.

It now reports under four segments. First, the data center segment captures revenue from server-related processing and graphics chips, like those used by cloud services providers. Second, the client segment includes hardware designed for desktop and notebook computers.

The third segment is gaming, which accounts for the chips used by companies like Sony and Microsoft for the PlayStation 5 and Xbox game consoles -- yes, both of them are powered by AMD hardware. Finally, fourth is the embedded segment, which now includes the bulk of Xilinx revenue but will likely evolve going forward to capture products developed by the joint companies.

Why the changes? Well, Xilinx is on track to add over $4 billion to AMD's revenue in 2022, and AMD thinks adaptive computing technology is the next frontier in the semiconductor industry. It can adjust to the users' needs in real time without the need to swap out hardware to achieve the required performance. 

Xilinx adds a substantial amount of value to AMD's overall business, so the adjustments ensure investors are receiving the company's financial results in the clearest way possible. 

Bringing it all together

AMD's second-quarter results were solid. The company grew its top-line sales to $6.6 billion, a 70% jump compared to the same quarter last year. But there was even greater underlying strength in AMD's data center segment, which saw revenue expand by a whopping 83% to $1.5 billion.

That shouldn't come as a surprise, because trillion-dollar giants like Microsoft, Amazon, and Google parent Alphabet all delivered soaring growth in their cloud services businesses in their most recent financial results (reported at the end of July). In fact, for each of those companies, revenue growth in their cloud segments far outperformed revenue growth from the rest of their business units

Therefore, it makes sense that those providers would be investing more in their cloud infrastructure to the benefit of AMD, which serves all three giants. 

Sales across the rest of AMD's segments were modest by comparison but still accretive to the company's overall result. Revenue in the client segment expanded by 25%, while the gaming segment saw a 32% increase. The newer embedded segment saw 2,228% growth, but that was against a tiny comparable number from last year (pre-Xilinx).

Wall Street is extremely bullish on AMD stock

AMD's earnings per share (profit) took a hit in the second quarter because of its acquisition of Xilinx. But when that effect is excluded (otherwise known as a non-GAAP result), the company actually generated 67% earnings growth year over year, which is a considerable result.

Over the last four quarters, AMD has delivered $3.83 in non-GAAP earnings per share, which places its stock at a price-to-earnings multiple of 25.5 -- marginally cheaper than the 26.9 multiple of the Nasdaq-100 technology index. It begs the question: Given the quality of AMD's business, does it deserve to be trading at a discount to the broader tech market?

Wall Street investment firm Rosenblatt Securities doesn't think so. In fact, it thinks AMD stock could soar to $200 a share, implying it could nearly double from where it trades as of this writing.