Advanced Micro Devices (AMD -1.96%), the popular chipmaker more commonly referred to as AMD, has been off to a sluggish start to 2025. Heading into trading this week, the stock had declined by 9% since January. But with some phenomenal long-term prospects, thanks to its artificial intelligence (AI) chips, could this be a millionaire-making investment?
The launch of new AI chips last year and some improved results could give investors reason to be more optimistic about the potential for the stock to deliver some mammoth returns. Below, I'll look at whether a $25,000 investment in the company could grow to at least $1 million by the time you retire.
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Plenty of growth opportunities ahead
Bearish investors may be skeptical about AMD since it has been lagging behind its larger rival Nvidia, but the reality is that the potential is so massive in AI chips that it may not matter who is ahead today. In the long run, there will be room for many AI chip companies to grab market share and achieve considerable growth.
For instance, take projections for the AI chip market. By 2032, analysts at Allied Market Research forecast that the industry will be worth $383.7 billion, which translates into a compound annual growth rate of 38.2% since 2023.
AMD recently announced a $10 billion collaboration with Saudi Arabia-based Humain "to build the world's most open, scalable, resilient, and cost-efficient AI infrastructure." Humain, which is a new AI company, also announced a strategic partnership with Nvidia.
There's big money to be made in expanding AI capabilities in Saudi Arabia and many other parts of the world. Partnering with two top chipmakers is simply a good strategy for Humain and other businesses.
In its most recent quarterly earnings report (for the period ending March 29), AMD reported sales totaling $7.4 billion, an increase of 36% from the prior-year period and an acceleration from the 24% revenue growth it posted a quarter earlier.
It's a good sign that the company's new Instinct MI325X chips, which were launched late last year as possible alternatives to Nvidia's Blackwell chips, have been doing well.
How a $25,000 investment could grow to $1 million
For a $25,000 investment to eventually be worth $1 million, it would need to rise to 40 times its original value. Here's a breakdown of what kind of an annual return you would need to average to achieve that, based on the number of years you have until retirement.
| Years Until Retirement | Average Return Needed |
|---|---|
| 20 | 20.25% |
| 25 | 15.90% |
| 30 | 13.08% |
| 35 | 11.12% |
Calculations and table by author.
The potential for AI to transform industries and affect the entire world is a massive opportunity for AMD. If the company's AI chips offer customers a real alternative to Nvidia's, then this could indeed be a top growth stock to own for years to come. However, AMD is yet to prove that.
Additionally, there is the risk of corrections in the market, recessions, and a possible slowdown in tech and AI spending, and that all could affect AMD's growth. While it may be tempting to assume the stock is going to grow at a high rate because of strong demand in the AI chip market, it's underperforming this year despite all the excitement around AI.
And all the above rates would mean that it does better than the S&P 500's long-run average of 10% -- which is by no means a guarantee.
Should you buy AMD stock?
As a leader in chip design, AMD stock has the potential to be a 40x investment, but it could take more than 30 years before that happens, and even that is by no means a sure thing. It's evident that investors are still on the fence about its long-term prospects as the business still needs to prove that its AI chips can compete and take significant market share from Nvidia. The company's growth has been improving, and if that trend can continue, that may be what gets the stock rallying.
Ultimately, I think the business is on the right path forward, and while its valuation may seem rich right now, trading at more than 80 times its trailing earnings. However, as it scales up its operations, its margins should improve; based on analyst projections, the stock trades at a multiple of just 27 next year's profits.
Regardless of how quickly you expect it to rise in value, AMD stock can be a no-brainer buy if you're holding on for the long haul; even if it doesn't end up being a 40 bagger, you're likely to earn some great returns from hanging onto the stock.
