The semiconductor industry is at the heart of the artificial intelligence (AI) revolution. Without the thousands of graphics processing units (GPUs) that fill each specialized data center, developing the most advanced AI software applications wouldn't be possible.
Advanced Micro Devices (AMD 2.42%) has become a top supplier of GPUs, but it also supplies industry-leading AI chips for personal computers. This could be a major growth area as more AI workloads shift onto devices to create a more convenient user experience.
AMD is scheduled to release its financial results for the second quarter of 2025 (ended June 30) on Aug. 5. Management's forecast points to another strong report, and CEO Lisa Su is likely to give investors a progress update on the company's latest hardware products, including the MI355X and MI400 data center GPUs.
With AMD stock up 30% this year already, should investors buy it ahead of the upcoming report, or is the potential good news already priced in?
Image source: Advanced Micro Devices.
AMD is chasing Nvidia in the data center space
Nvidia's (NVDA 0.36%) H100 GPU was the hottest data center chip for AI workloads in 2023, earning the company a 98% market share. AMD was late to the party, launching its H100 competitor -- the MI300X GPU -- in December of that year. However, it successfully attracted many of Nvidia's top customers including Oracle, Meta Platforms, and Microsoft.
Nvidia remains a step ahead following the launch of its Blackwell GPU architecture in 2024, and Blackwell Ultra this year. But AMD is closing the gap with its new CDNA (Compute DNA) 4 architecture, which is around 35 times more powerful than its previous generation. It's at the foundation of new GPUs like the MI355X, which just started shipping to customers. Oracle, for instance, has ordered over 130,000 of them.
Nvidia and AMD will up the ante yet again in 2026 with a new series of GPUs. Nvidia plans to launch its Rubin chips, and AMD will release its MI400 Series. Based on what we know so far, the two platforms are likely to deliver similar performance, so it could be the official moment AMD finally catches up to Nvidia from a technological perspective. Su will likely offer a progress update on the MI400 on Aug. 5.
But investors should also keep an eye out for updates on other product platforms outside the data center, like the Ryzen AI 300 series of chips for personal computers. They come with a built-in GPU, central processing unit (CPU), and neural processing unit (NPU) to form industry-leading AI chips, which are already being adopted by top PC manufacturers like Asus, HP Inc., and Dell.
PC chips are gradually becoming powerful enough to run AI workloads locally, which means queries don't have to travel back and forth to external data centers. This creates a faster user experience, and it also means popular AI applications can be run offline without an internet connection, making them more accessible.
AMD's AI revenue likely soared again in Q2
AMD generated $7.4 billion in revenue during the first quarter of 2025 (ended March 31), which was a 36% increase from the year-ago period. That included $3.7 billion in data center revenue, which was up 57% on the back of strong GPU sales, and $2.3 billion in client segment revenue, which was up 68%. The client segment is where the company accounts for sales of its Ryzen AI chips.
AMD's guidance suggests its total revenue came in somewhere between $7.1 billion and $7.7 billion during the second quarter, with the high end of that range representing 32% year-over-year growth. The forecast includes an expected $700 million drop in revenue from the U.S. government's latest restrictions on chip exports to China, so the company's results would otherwise be much stronger.
AMD didn't offer a specific second-quarter forecast for the data center or client segments, but considering they account for a combined 81% of the company's overall revenue, they are likely to continue driving most of its growth. On the other hand, the company's smaller gaming and embedded segments could be a drag on the business yet again.
AMD's gaming business supplies chips for consoles like Sony's Playstation 5 and Microsoft's Xbox, which are suffering a steady decline in sales. The embedded business designs chips for industrial applications and its revenue has declined over the last few quarters, but AMD does expect a return to growth in the second half of this year.
Should you buy AMD stock before Aug. 5?
One quarter is unlikely to change AMD's positive long-term trajectory in the AI hardware space. However, its stock isn't cheap right now following a 30% year-to-date gain, so whether or not investors should buy it ahead of its upcoming earnings report might depend on their time horizon.
Based on AMD's $3.66 in adjusted (non-GAAP) earnings per share (EPS), its stock trades at a price-to-earnings (P/E) ratio of 43.1. Therefore, it's cheaper than Nvidia stock, which trades at a P/E ratio of around 53.7, but Nvidia's business is growing at a much faster pace, which justifies its premium valuation.
That means investors who are looking for significant short-term gains from AMD stock over the next few months might be left disappointed. However, Wall Street's consensus estimate (provided by Yahoo! Finance) suggests AMD's non-GAAP EPS could grow to $5.71 in 2026, placing its stock at a forward P/E ratio of just 27.6. That leaves room for considerable upside, so investors who are willing to hold the stock for the next 18 months could do very well if they buy it today.
But holding AMD stock for an even longer-term period of five years or more will probably produce the best results, because it will give the company ample time to create value from its AI chip sales across the data center and PC markets, thus maximizing potential returns for investors.
In summary, short-term investors probably shouldn't buy AMD stock too aggressively ahead of Aug. 5, but those with a long-term outlook could earn great returns by scooping it up today.
