Companies joining the artificial intelligence (AI) market have experienced a bull run in 2023, with companies like Nvidia and Microsoft enjoying stock rises of 165% and 39% since Jan. 1. As a leading chipmaker with much to gain from the sector's development, Advanced Micro Devices (AMD 2.26%) also benefited from the rally as its shares have soared 92% in the same period. 

AMD's prospects in AI seem to grow by the day as its expansion in the industry develops. However, some analysts have voiced concerns that the company's price may be overinflated after its latest rally and might not be able to live up to the hype. 

Here is the bear versus bull review for AMD stock. 

Bear: An expensive stock price 

While AMD's stock skyrocketed this year on the prospects of AI, its value has fallen. The company's price-to-earnings ratio (P/E) is up more than 1,000% year to date, hitting 540. The figure is far higher than the preferred 20 or below, which often indicates a good-valued stock.

As a result, if you're considering buying AMD stock, it's crucial to keep a long-term mindset. The company's shares could take a temporary dive if AMD can't immediately deliver on its AI potential. However, that is unlikely to affect its growth over the next decade and beyond. 

AMD shares have risen about 695% in the last five years and more than 3,000% in the last decade. The company has a solid outlook thanks to its ability to supply chips to a variety of industries. Yet, with such a rapid stock rise this year based on the prospects of a largely untested market, the company's short-term stock performance could be volatile.

The good news is, despite the uncertainty, AMD's forward price/earnings-to-growth ratio (PEG), which takes into account expected earnings growth, is at an attractive 0.2. The metric suggests AMD has not veered from its growth path and remains an attractive investment for patient investors.

Bull: Massive potential in artificial intelligence 

Amid the buzz concerning AI, AMD has garnered a lot of attention from tech enthusiasts and Wall Street. However, the complexity of the technology might leave you wondering how exactly the company will profit from the industry's growth. So, let's take a closer look.

AMD is home to a variety of powerful chips with its line of central processing units (CPUs), graphics processing units (GPUs), and data processing units (DPUs). These chips are required to run a wide range of tasks from gaming to video editing, cloud computing, and of course, running and developing AI programs.

For reference, OpenAI's ChatGPT utilized about 20,000 GPUs in 2020 and is expected to increase that number to 30,000 as it readies for commercialization. 

Nvidia gained a slight edge over AMD by becoming the primary supplier of GPUs to ChatGPT. However, the fight isn't over yet. AMD's prospects in AI have strengthened thanks to a recent partnership with OpenAI's biggest investor, Microsoft.

According to a Bloomberg report from May 4, Microsoft is supporting AMD's AI chip expansion by providing financial and engineering resources. The Windows company's aim is to help AMD become an equal alternative to Nvidia.

Moreover, data from Grand View Research states the AI market is projected to expand at a compound annual growth rate (CAGR) of 37% through 2030 after hitting $137 billion in 2022. The monster CAGR indicates it's still early days for the industry, with plenty of market share still up for grabs.

Nvidia may have had a head start, but it's not too late for AMD to capture a substantial part of the sector in the coming years. 

AMD shares might be pricey right now, suggesting it's wise to exercise caution. However, if you're willing to hold for the long term, the company's prospects in AI are worth an investment.