Nvidia and Broadcom are the leading players in the artificial intelligence (AI) semiconductor market. Both chip designers dominate their respective niches, which has helped them clock respectable gains on the market so far this year.
Nvidia's leading position in the data center graphics processing unit (GPU) market has led to a 39% jump in its stock price this year. Meanwhile, rapidly growing demand for custom AI processors has sent shares of Broadcom up by 48%. However, the gains clocked by these semiconductor stocks are well below the 99% spike in shares of Advanced Micro Devices (AMD +0.45%).
A nice chunk of AMD's gains has arrived since the beginning of October, after it became evident that its stature in the AI chip market is rising. Let's look at the reasons why AMD has shot into the limelight and has upstaged its more illustrious rivals of late.
Image source: AMD
AMD's data center business is primed for terrific growth
AMD has historically played second fiddle to Nvidia and Intel in the data center market. However, it is now coming out of their shadows.
NASDAQ: AMD
Key Data Points
For instance, the enterprise adoption of its server central processing units (CPUs) has simply taken off this year. AMD's Fortune 100 CPU enterprise customer base has increased by more than 60% this year. Meanwhile, the total number of new customers has more than doubled in the first nine months of 2025. As a result, AMD believes it is on track to end 2025 with a 40% revenue share of the server CPU market.
But more importantly, management now sees a "clear path" to a market share in excess of 50% in the long run. AMD points out that its next-generation server CPU, code-named Venice, is going to be 1.7 times more powerful and efficient than its current offerings. This could spur greater adoption of AMD's Epyc server processors, which are already in solid demand thanks to their ability to lower the operating costs of data centers. Cloud computing major Oracle is one of those companies set to deploy the Venice CPUs in data centers.
AMD points out that AI-driven demand for its data center CPUs could create a $60 billion addressable market opportunity for the company by 2030. That would be more than double the $26 billion revenue that the data center CPU market is expected to generate this year. A 50% revenue share of this market could send AMD's data center CPU revenue to $30 billion by the end of the decade. That would be nearly 4x the data center CPU revenue the company is projected to have generated in 2024.
On the other hand, AMD expects its data center GPU business to step on the gas as well. The company is projecting a major bump in the compute performance of its data center GPUs from 2026, when it launches the MI450 series of accelerators.
The good part is that its next-generation GPUs have already been selected for deployment by the likes of OpenAI, Oracle, Meta Platforms, and the U.S. Department of Energy. In all, AMD points out that seven of the top 10 AI companies are already using its Instinct data center GPUs, while the overall customer base includes many other companies such as Tesla, Samsung, and others.
Thanks to strength in both the data center CPU and GPU markets, AMD is now expecting its data center business to clock a compound annual growth rate of over 60% for the next three to five years. Meanwhile, the 10% annual growth the company projects in its other business segments -- personal computers, gaming, and embedded chips -- should complement the outstanding growth it anticipates in data centers.
Solid financial growth should translate into healthy stock market gains
AMD management pointed out on its latest Financial Analyst Day that it is expecting its overall revenue to increase at a 35% CAGR over the next three to five years. Additionally, the company is targeting its non-GAAP (generally accepted accounting principles) earnings to exceed $20 per share during this period.
AMD is expected to end 2025 with $3.94 per share in earnings. So, a reading of $20 per share after five years would translate into an annual growth rate of just over 38%. That looks achievable, considering it's expecting its non-GAAP operating margin to exceed 35% in the next three to five years, which would be a major improvement over its 2024 margin of 24%.
However, the potential margin improvement along with the robust revenue growth may help AMD achieve $20 per share in annual earnings before 2030. If the company hits that mark in just three years and trades at 34 times earnings at that time (in line with the tech-laden Nasdaq-100 index's earnings multiple), its stock price could jump to $680. That would be 2.8x of AMD's current stock price.
So, AMD has the potential to keep delivering outstanding gains in the next three to five years, even after the impressive upside that it has clocked in 2025, giving investors a solid reason to add this AI stock to their portfolios.
