Inflation, supply shortages, and rising interest rates were too much for the markets last year. These headwinds hit expensive growth stocks particularly hard, but many top stocks are starting to impress Wall Street again with strong business fundamentals.

Advanced Micro Devices (AMD -0.34%) and Roblox (RBLX 0.84%) have returned 38% and 50%, respectively, since the beginning of the year. These companies are tapping into long-term megatrends of artificial intelligence (AI) and the metaverse, so it's not surprising to see investors coming around to these promising growth stories.

Let's take a deeper look at what's driving these two breakout growth stocks higher and why it's not too late to buy them today.

1. Advanced Micro Devices

Companies across just about every industry are investing in cloud services and AI to more cost-effectively run their business, speed up product development, and power personalized recommendations. All these require one thing: high-performance processors to process large data workloads.

Advanced Micro Devices has been gaining market share against Intel in recent years to meet the growing demand for hardware acceleration. Since 2019, revenue has more than tripled to $23 billion, and AMD just capped off a transformative year that positions it for more growth. 

AMD Chart

Data by YCharts.

Last year, AMD made a game-changing $48 billion acquisition of Xilinx, a leading provider of adaptive system-on-chips and field-programmable gate arrays (FPGAs) used in edge computing devices, including smart home applications, consumer electronics, and industrial markets, such as 5G wireless. AMD also expanded its data center capabilities with the acquisition of Pensando Systems, which rounds out the company's chip portfolio with data processing units (DPUs) and other data center solutions. 

While AMD is also a key supplier of processors for consumer desktops, notebooks, and gaming consoles, data center and embedded chips made up over half of its fourth-quarter revenue and will be a key growth driver over the long term. Strong demand from enterprise helped AMD finish the year with adjusted (pro forma) revenue up 20% over 2021. 

However, enterprises started to slow their data center spending in the second half of 2022, and Wall Street is worried this could dictate a slower cadence of spending in 2023, impacting AMD's data center business.

Indeed, management expects a softer start to 2023, but the stock is still moving higher for a few reasons. The lower forward price-to-earnings (P/E) ratio of 31 offers a better entry point for investors than a year ago. Also, AMD's addressable market opportunity has now expanded to an estimated $300 billion through 2025 following the acquisitions last year. 

AMD has a promising future and should deliver more returns for investors from here.

2. Roblox

Roblox stock has been a roller-coaster over the last few years. The company reported soaring revenue during 2020 when kids were at home spending more time playing games, but this turned into a major headwind once they went back to school.

The reopening of the economy in 2021 and the macroeconomic headwinds in 2022 have made it difficult for Roblox to maintain robust growth rates.  As revenue growth slowed, the stock tumbled, but it might have sold off a little too much given the continued revenue stability of the business. 

RBLX Chart

Data by YCharts. TTM = Trailing 12 month.

Roblox is tapping into a powerful long-term trend in socialized gaming. More players are jumping into games these days to hang out with friends as much as anything else. Moreover, Roblox is not just a gaming platform but also offers plenty of non-gaming experiences, such as virtual music concerts and brand-themed worlds from NikeChipotle Mexican Grill, among others.  

One metric that signals a buying opportunity is the continued growth in users. Roblox ended 2022 with 58.8 million daily active users, up from 49.5 million in 2021 and 37.1 million in 2020.  

Revenue has trailed the growth in users over the last few years, but the Q4 earnings report showed a sharp increase in bookings (a non-GAAP measure of revenue). This indicates user monetization is starting to catch up to the recent growth in new players.  

Roblox stock looks expensive relative to other video game and social media stocks, currently trading at a price-to-sales (P/S) multiple of 11.6. But there are not many gaming and social media companies reporting double-digit growth in bookings and daily active users right now either.

If Roblox can successfully monetize its new players over the long term through more immersive gaming experiences and advertising, the stock could be a home run over the next decade.