Advanced Micro Devices (AMD 1.84%) stock is surging higher on a dramatically improved outlook. CEO Lisa Su announced growth projections for the overall company that have analysts and shareholders excited, and such gains will likely stoke the stock's growth further.
Moreover, optimism about its data center segment, which designs AI accelerators, drove the projection. Amid that optimism, the stock is likely to trounce the S&P 500 in 2026 and perhaps beyond, and here's why.
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AMD's growth projections
At AMD's Financial Analyst Day event on Nov. 11, the company released its growth projections over the next three to five years.
The company revealed that it expects a compound annual growth rate (CAGR) for the company's revenue of over 35% during that time. This includes over 10% for its core business and growth exceeding 60%!
From one perspective, such growth is not unusual, as Nvidia, which is now oriented around its data center segment on account of its AI accelerators, reported 56% year-over-year revenue growth in its most recent quarter. Also, AMD reported 36% annual revenue growth in the third quarter of 2025.
Still, the average S&P 500 company grows revenue in the 5.3% to 5.6% range in a typical year, according to Bloomberg, meaning AMD will probably far exceed the S&P averages.
Admittedly, valuation differences could turn into a growth obstacle. AMD's price-to-earnings (P/E) ratio now stands at a staggering 128, far above the S&P 500 average of 31. Thus, if AMD somehow fails to meet its own expectations, the stock could suffer.
NASDAQ: AMD
Key Data Points
Where improving growth prospects leave AMD
Nonetheless, the anticipated growth bodes well for its valuation, as its forward P/E ratio is 66. While still high, that speaks to AMD's rapid growth. The forward one-year P/E ratio of 40 also points to a continuing growth trend that reduces the likelihood of AMD stock falling over the next year.
Moreover, investors should remember that the higher growth is a considerable ramp for AMD, which grew revenue by 18% year-over-year in 2024's Q3.
Additionally, in the most recent quarter, AMD's growth was primarily driven by the client and gaming segment, which increased revenue by 73% year-over-year in Q3 2025, well over 22% for the data center segment during that time.
Plus, data center revenue accounted for approximately 43% of the overall total during the same period. However, that percentage will likely increase as data center revenue begins to grow at more than 60% annually. This will likely bring AMD's revenue breakdown closer to Nvidia's, whose data center segment now accounts for 88% of overall revenue.
Knowing that, AMD's smaller size could become an advantage over Nvidia's stock, driving more relative investment. Under current conditions, Nvidia's $5 trillion market cap means it has to grow to $10 trillion for its stock price to double -- a tall order in a market that has yet to witness a $6 trillion market cap.
In comparison, AMD's $423 billion market cap is considerable but a small fraction of Nvidia's size. That means AMD stock could double three times and still be smaller than Nvidia. Even if AMD is not necessarily destined to become as large as Nvidia, that point alone could persuade more prospective shareholders to choose AMD stock over Nvidia.
AMD and the S&P 500
Considering the current state of the market and AMD's new growth projections, the semiconductor stock is highly likely to outperform the S&P 500 in 2026.
Indeed, AMD was growing more slowly in recent quarters and is a small fraction of rival Nvidia's size. Nonetheless, its new growth projections put AMD on track to far outpace the S&P 500's growth for the foreseeable future.
Even with its elevated valuation, investors are likely to keep buying as the forward P/E ratio measurements point to anticipated rapid profit growth. Also, a smaller relative size makes it likely AMD's stock will grow faster than Nvidia's.
Under such conditions, AMD is in an excellent position to not only beat the S&P 500 but also stand out above its largest rival.
