Advanced Micro Devices (AMD -0.31%) shares returned 441% over the last five years, largely driven by market share gains against Intel in central processing units (CPUs). The company's opportunity selling graphics processing units (GPUs) to data centers could be even bigger and support another major run for shareholders in the next decade.

The demand for artificial intelligence (AI) hardware has already sent Nvidia stock to the stratosphere. Here's why AMD could be next.

1. A $400 billion opportunity

AMD is at the start of a tsunami wave in data center spending. Data centers need lots of GPUs to handle the workloads for AI. AMD CEO Lisa Su has said the market for so-called AI accelerators could reach $400 billion by 2027. It's a massive figure next to AMD's outlook for $3.5 billion in data center GPU revenue this year.

Growing customer deployments of its Instinct GPUs and robust demand for Epyc server chips drove high-double-digit growth in the data center segment in the fourth quarter of 2023. Management said its new MI300 accelerators will be the fastest revenue-ramping product in the company's history.

Microsoft is already using the Instinct MI300X accelerators for its Azure cloud services business, while Facebook owner Meta Platforms is using the chip for AI inferencing and to optimize its Llama 2 large language models.

Analysts expect revenue to increase 14% in 2024 before accelerating to 26% in 2025. But the real story is what this growth could do to AMD's profits, or earnings per share.

2. Growing data center revenue will drive record profits

Nvidia has been the star of the show in the AI chip market so far. Demand for its costly data center GPUs is allowing the company to earn incredibly high margins, which is uncommon in the semiconductor industry.

AMD may not see a 48% profit margin like Nvidia, but with its profit margin currently in the single-digit range, there is tremendous upside to its profitability. The market is underestimating its future earnings growth, as sales of data center GPUs start to ramp up.

In the near term, AMD has guided for a small increase to its gross profit margin, driven by expected sales of its data center chips and Ryzen CPUs. Over the long term, the consensus Wall Street estimate has AMD growing earnings at an annualized rate of 42%.

3. The stock could double again

Analysts currently forecast AMD's earnings to reach $7.26 in 2026. Assuming the stock is still trading at a forward price-to-earnings ratio of 40, the stock would be priced at $290, or nearly double the current share price of $150.

Given Su's success at AMD since 2014, investors shouldn't underestimate the company's ability to outperform expectations. AMD was way behind Intel in CPUs a decade ago, but it outmaneuvered the industry leader and gained significant market share. Su called the transition to AI a once-in-a-generation opportunity earlier this year, and the company is clearly positioning itself for another major growth spurt.