Advanced Micro Devices (AMD 2.37%) rallied 23% in the month of November, according to data from S&P Global Market Intelligence.

AMD's performance was buoyed by its third-quarter earnings report, released after the close of trading on Oct. 31. In addition, management gave a strong outlook for its data center segment and specifically sales of its MI300 accelerator for AI applications, which is in its first stages of commercial ramp-up.

After that blast-off to start the month, AMD continued marching higher through November, as two inflation reports came in softer-than-expected and long-term interest rates came down.

All eyes on the MI300

In its third quarter, AMD grew revenue 4.1%, with adjusted (non-GAAP) earnings per share of $0.70, beating analyst expectations.

Even though its reported numbers beat muted expectations, it was still surprising AMD actually rallied, given its light guidance. Management said it expects just $6.1 billion in fourth-quarter revenue, which was actually lower than analyst expectations of $6.4 billion. Usually, a stock moves according to a company's guidance more than its backwards-looking reported results.

However, AMD management explained the light guidance was due to weakness in the gaming sector, as well as continued weakness in field programmable gate array (FPGA) chips gained in the Xilinx acquisition, which are used in a lot of communications and industrial markets.

But investors really care much more about AMD's data center segment, and specifically adoption of AMD's new MI300 accelerators, which the company hopes will compete with Nvidia's (NVDA 6.18%) GPUs in artificial intelligence applications. There, CEO Lisa Su said AMD's data center business should see strong growth in Q4, helped along by the launch of MI300. Su even went on to give more specific guidance for the MI300, which she believes will do $400 million in sales in the fourth quarter and over $2 billion in 2024.

That forecast, while far, far below what Nvidia is making from its data center chips today, still signified enough early adoption to get investors excited about the product's future growth.

Of note, AMD will be hosting an analyst event focused on artificial intelligence today at 1 p.m. EDT.

Promising prospects, but AMD stock reflects them

AMD is an interesting play on data center growth, but the stock is not exactly cheap after its November run, at 32 times next year's earnings estimates. I also wouldn't expect nearly as big of a lift from AI growth as Nvidia will get in the year ahead. Although AMD is working from a small base, its data center segment accounted for only 28% of revenue last quarter, with the rest of the business in the less-attractive client, gaming, and embedded markets. And if AMD achieves $400 million in new MI300 revenue next quarter, that would only make up less than 7% of overall revenue.

While data center growth should grow by leaps and bounds next year, that may not lift AMD's overall results as much as some might think. That being said, the AI accelerator market is forecast to be huge in a few years, so if AMD can really make more significant inroads into Nvidia's dominant market share, it could in fact justify today's valuation -- and then some. But that's a tough hill to climb.