Advanced Micro Devices (AMD 3.70%) investors have endured a difficult year thus far as shares of the chipmaker declined 54% Source: YCharts amid the broader stock market sell-off. But this could be an ideal time for savvy investors to buy the stock given its mouthwatering valuation.

AMD is now trading https://www.morningstar.com/stocks/xnas/amd/valuation at 27 times trailing earnings, which is a massive discount compared to the stock's five-year average price-to-earnings ratio of 100. The stock's forward earnings multiple of just 12.9 shows that its earnings are set to grow at a terrific pace over the next year. What's more, AMD's forward earnings multiple makes it cheaper than the Nasdaq-100's forward multiple of 20.8.

Buying AMD at these multiples looks like the right thing to do given its outstanding growth, especially considering that the chipmaker could sustain its momentum thanks to a massive opportunity in the data center business. Let's take a closer look at this opportunity and see why it could give AMD a solid boost in the long run.

AMD is scratching the surface of a multibillion-dollar opportunity in server processors

AMD's data center revenue stood at $1.5 billion https://ir.amd.com/news-events/press-releases/detail/1084/amd-reports-second-quarter-2022-financial-results in the second quarter. The segment's revenue shot up 83% over the prior-year period thanks to strong sales of its EPYC server processors. It is worth noting that AMD's data center revenue has nearly doubled in the first six months of 2022 to $2.8 billion. The company could finish the year with just over $5.6 billion in data center revenue if it maintains its current pace of growth.

AMD's data center business should be able to sustain such outstanding growth for years to come. That's because AMD sees a $42 billion https://d1io3yog0oux5.cloudfront.net/_7d046f7918c7d75587535ecc5058781c/amd/db/812/6834/presentation/FAD+2022_Dan+McNamara_Final+Post.pdf slide 6 revenue opportunity in the server processor market alone over the long run, driven by the growing adoption of cloud computing, the proliferation of high-performance computing data centers, and the growth of enterprise workloads.

Intel (INTC 2.13%) is AMD's biggest competitor in the server processor market, but the chip giant has been helpless to stop the latter from going after this $42 billion opportunity. This is evident from Intel's market share losses and AMD's gains in server processors so far this year.

AMD controlled https://www.tomshardware.com/news/lowest-cpu-shipments-in-30-years-amd-intel-q2-2022-cpu-market-share 10.7% of the server processor market at the end of the fourth quarter of 2021, according to Mercury Research. Its share increased to 11.6% at the end of the first quarter, followed by a jump to 13.9% in the second quarter. Intel controls the rest of the server processor space, but is losing its grip.

AMD was a negligible player in the server processor market at the end of 2017, and it could exit 2022 with a respectable share as it is likely to make further inroads into Intel's territory. Intel CEO Pat Gelsinger's comments at a recent analyst conference suggest that Chipzilla is likely to lose more ground in the data center market.

Gelsinger said https://www.tomshardware.com/news/intel-expects-continued-market-share-loss-throughout-2023-will-likely exit-more-businesses that the competition's momentum and Intel's execution issues are likely to lead to more market share losses in data centers. More specifically, Intel is unlikely to keep up with the broader data center market's growth into 2025, and it expects to start regaining "material share" only from 2026. So AMD could establish itself as a bigger player in the server processor market by 2025.

Gauging the potential revenue opportunity

It is estimated that AMD could corner https://wccftech.com/amd-epyc-server-cpu-market-share-18-percent-by-2024-intel-xeon-downfall-arm-10-percent-growth/ 18% of the server processor market by 2024, but don't be surprised to see it grab a bigger slice thanks to its aggressive product roadmap. The chipmaker will release its fourth-generation server processors (based on a 5-nanometer process) in the current quarter, promising https://d1io3yog0oux5.cloudfront.net/_7d046f7918c7d75587535ecc5058781c/amd/db/812/6834/presentation/FAD+2022_Dan+McNamara_Final+Post.pdf more than 75% gains over the third-gen processors.

AMD also plans to release its fifth-generation EPYC server processors, codenamed https://d1io3yog0oux5.cloudfront.net/_7d046f7918c7d75587535ecc5058781c/amd/db/812/6834/presentation/FAD+2022_Dan+McNamara_Final+Post.pdf Turin, in 2024, which could be based on 3-nanometer and 4-nanometer manufacturing nodes. Intel's next-generation Sapphire Rapids processors, on the other hand, were delayed https://www.digitaltrends.com/computing/intel-sapphire-rapids-server-cpu-delayed-yet-again/ yet again. They are expected to be released in 2023, which means that Intel will be on a 7nm process while AMD will move ahead on the technology curve with a more advanced node.

As such, don't be surprised to see AMD increase its share of the server processor market over the next few years. If AMD corners a 25% share of this space by 2025, then server processors alone could generate $10 billion in annual revenue for the company given the $42 billion opportunity discussed earlier. Throw in the other catalysts in the data center business, such as data processing units, embedded processors, and graphics cards, and it's easy to see that this business could become a big money spinner for AMD in the long run.

In all, AMD is built for long-term growth, and management forecasts https://d1io3yog0oux5.cloudfront.net/_7d046f7918c7d75587535ecc5058781c/amd/db/812/6839/presentation/FAD+2022_Devinder+Kumar_Final+Post.pdf slide 14 the company's revenue to increase at a compound annual growth rate of 20% for the next three to four years. Its operating margins are expected to land in the mid-30s during the forecast period, which would be a nice improvement over last year's operating margin of 25%.

All this makes AMD a top tech stock to buy right now given its attractive valuation.