Advanced Micro Devices (AMD 0.17%) is one of the world's largest suppliers of semiconductors. Its chips can be found in popular consumer products like Sony's PlayStation 5, Microsoft's Xbox, and even the infotainment systems inside Tesla's electric vehicles.
However, AMD's biggest opportunity right now is in the data center. The company is planning to launch a new lineup of graphics processing units (GPUs) for AI development in 2026, which could blow the competition -- including Nvidia (NVDA 1.05%) -- out of the water.
AMD stock is up 34% in 2025 already, but it's still below its all-time high just north of $200, which was set last year. Should investors scoop it up while it's still trading at a discount? Read on to find out.
Image source: Advanced Micro Devices.
AMD is catching up to Nvidia in the data center space
AMD launched its flagship MI300X data center GPU at the end of 2023, more than a year after Nvidia's industry-leading H100 GPU hit the market. Despite being behind, AMD still managed to attract some of Nvidia's largest customers, including Microsoft, Oracle, and Meta Platforms.
While Nvidia continues to leap ahead of the competition with new GPU architectures like Blackwell and Blackwell Ultra, AMD is quickly closing the gap. It just started shipping its MI350 series GPUs, which are based on a new architecture the company calls Compute DNA (CDNA) 4. These new chips offer 35 times more performance than CDNA 3 versions like the original MI300X, placing them on par with Nvidia's Blackwell lineup.
In fact, the latest MI355 offers comparable performance to Nvidia's Blackwell GB200 GPU, and it delivers up to 40% more tokens (words, symbols, and punctuation) in AI inference workloads for the same cost. In other words, it's much cheaper to run over the long term without sacrificing any processing power, which is why it's attracting hyperscalers and even leading AI start-ups like OpenAI.
But customers' attention is already turning to 2026, when AMD plans to release its MI400 series. These new chips will be combined with specialized software and hardware systems to create a fully integrated AI data center rack called Helios, which will supercharge their performance. AMD CEO Lisa Su believes these MI400-based Helios systems will be the most powerful in the world when they launch, offering a staggering 10 times more performance over the MI350 series.
Simply put, 2026 could be the year that AMD overtakes Nvidia in the AI data center space, at least in terms of technological capability.
AMD's AI data center revenue hit a speed bump in Q2
AMD generated a record $7.7 billion in total revenue during the second quarter of 2025, which was a 32% increase from the year-ago period. The data center segment was responsible for $3.2 billion of that revenue on its own, but it only mustered 14% growth, which was somewhat disappointing given the competitive, high-stakes nature of the GPU market.
Export restrictions were recently imposed by the U.S. government, and they wiped out AMD's AI GPU sales to China, which was the main reason for the underperformance in its data center segment. However, the company says it has applied for licenses to resume sales, and they are currently under review by the Trump administration.
But there was great news in other areas of AMD's business, like its client segment, where revenue soared 67% year over year to $2.5 billion. This is where the company accounts for sales of its Ryzen AI chips for personal computers, which come with a built-in GPU, central processing unit (CPU), and neural processing unit (NPU). They are installed in a growing number of computers from leading brands like Dell, HP, Acer, and Asus.
AMD's gaming business also roared back to life in Q2, with revenue surging by 73% to $1.1 billion. Revenue declined in this segment last year, and also during the first quarter of 2025, but demand for some of the company's core products is starting to rebound. Console manufacturers are increasing their inventories in preparation for the holiday season, and AMD said demand for its new Radeon 9000 series desktop GPUs is exceeding supply.
Should you buy AMD stock while it's under $200?
Despite the temporary regulatory headwind in AMD's data center business, Lisa Su is as optimistic as ever about its potential. She believes the company's AI revenue will scale into the tens of billions of dollars per year over the long term, driven by the MI400 GPU, which is already experiencing strong customer interest even though it won't hit the market until next year.
On that note, is AMD stock a buy while it's still below its record high? The company generated $3.45 in non-GAAP (adjusted) earnings per share (EPS) over the last four quarters, placing its stock at a price-to-earnings (P/E) ratio of 46.8. That means it's notably cheaper than Nvidia stock, which is sitting at a P/E ratio of 55.7.
Moreover, Wall Street's consensus estimate (provided by Yahoo! Finance) suggests AMD could deliver $5.97 in EPS during 2026, placing its stock at a forward P/E ratio of just 27.1. That leaves room for significant upside, because the stock would have to soar by 73% over the next 18 months just to maintain its current P/E ratio of 46.8.
It's possible AMD stock will perform even better if the MI400 series blows the competition out of the water next year, like Su expects, so it could be a great addition to any diversified portfolio right now.
