It's easy to hold a growth stock and feel good about it when that asset is outperforming the S&P 500. However, corrections can test an investor's patience and cause people to exit great companies too early. That test has recently unfolded with Advanced Micro Devices (AMD 3.20%).
The AI chipmaker is down by more than 20% from its all-time highs despite posting impressive revenue growth and rising margins. It has the makings of a compelling long-term stock, and investors can currently get it at a discount.
A new era of growth
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Advanced Micro Devices told investors in November 2025 that it has a multiyear plan to lead the $1 trillion compute market and accelerate the next phase of growth. AMD will have to compete with Nvidia to gain market share in the hot industry, but if AMD manages to take some of Nvidia's market share, it can result in substantial revenue and net income growth.
NASDAQ: AMD
Key Data Points
AMD anticipates it will achieve a 35% revenue compound annual growth rate (CAGR) for the next three to five years, while its data center AI segment will achieve an 80% CAGR.
Its growth plans also hinge on the robotics industry. ABI Research projects that the robotics industry will more than double from $45 billion in 2024 to $110 billion by 2030, representing a CAGR of 14%. This helps demonstrate how AMD could achieve its long-term targets.
AMD can also boost net profit margins, which tend to sit a little above 10%, as its sales go up. Getting net profit margins up to 20% or 30% while achieving long-term CAGR goals makes the current dip look like an enticing buying opportunity. Nvidia has net profit margins above 50%, while Broadcom's are usually above 30% but almost reached 50% in the most recent quarter. The success other competitors have had in increasing their margins shows that it is possible for AMD.
AI chips have been integral for AI models like ChatGPT, but robotics stocks can drive the next wave of AI demand. Robots will require AI chips like AMD's to operate smoothly, and as more robots are created, the demand for chips will continue to increase.
AMD's new product lineup should boost its market share
AI chipmakers must continue to produce new products to retain their market share and have the opportunity to advance. AMD delivered strong results with its existing products, and it announced several new ones at CES, which should boost momentum.
AMD announced its new AMD Instinct MI440X GPU, which is designed for on-premises enterprise AI deployments. The company said its AMD Instinct MI500 GPUs will come out in 2027. The new product, another on the way, and strong AI tailwinds present a bright outlook for AMD.
While other companies are also developing new AI products, AMD has a distinct advantage due to its existing partnerships. AMD already provides chips for big tech companies and have validated that their chips are some of the best in the industry. Recent partnerships with OpenAI, the U.S. Department of Energy, and Oracle show that AMD could land new deals and expand existing partnerships, as its new products should attract new customers and give old customers more reasons to place larger orders.
Some investors are worried about an AI bubble, and that term seems to gain popularity when AI stocks drop by 10% or more. Those overblown fears present plenty of opportunities, and AMD may be one of the best AI picks right now. AMD's long-term plans suggest it can become a $1 trillion company within a decade.
