Advanced Micro Devices (AMD 3.46%) had a great run in 2025, with the stock jumping 77.3% during the year. Of course, with a market cap of only around $411 billion, AMD is nowhere near Nvidia's (NVDA 1.53%) $4.65 trillion level (yet). That's actually a good thing for inventors.
Like Nvidia, AMD designs and markets computer chips, such as central processing units (CPUs) and graphics cards/artificial intelligence (AI) accelerators. It has several notable brands under its umbrella, including the successful Ryzen CPUs, the EPYC CPU, and the Instinct GPU lines for data centers and cloud servers.
The huge demand for its products to meet the growing needs of companies working with AI translated into increased demand for its stock in 2025. However, that was past performance, and most investors are more interested in future performance. Does AMD have what it takes to remain a top AI performer in 2026? Let's check the scoreboard.
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AMD's stock performance is showing promise
AMD's main products were historically known as a cheaper alternative to Intel CPUs, and for years, it operated in Intel's shadow. But as Nvidia's Blackwell chips began to fly off the shelves to meet the exponentially growing AI demand, customers like OpenAI began looking for alternatives to meet their internal needs, and AMD's Instinct AI accelerators stepped in to fill that gap. The result is now reflected in AMD's stock price, which has risen by about 121% over the last year (as of Jan. 29).
When share prices rise that much, that fast, valuation concerns about the stock rise as well. Currently, the stock is trading at around 132 times trailing-12-month earnings and 102 times forward earnings (GAAP). Historically, high P/E multiples have been corrected by either accelerating earnings growth or compressing stock prices.
The classic David versus Goliath story -- or is it?
Let me be clear: For AMD to become the top AI stock this year, it doesn't have to beat Nvidia at market cap or anything of the sort. In fact, it doesn't really have to beat anyone at any game. It just needs to keep doing what it's been doing over the past couple of quarters.
In its latest financial results, AMD reported that revenue grew 36% year over year to $9.2 billion, beating analysts' expectations of $8.7 billion. Earnings per share, meanwhile, came in at $1.20 (adjusted) versus the $1.16 estimate. Overall, it was an excellent quarter that showed that AMD's AI offerings (data center and consumer-grade chips) are seeing increased usage across the board.
AMD management's fourth-quarter guidance calls for $9.6 billion in revenue. If it hits that target, the company's full-year top line would reach $34 billion. That would mean a 31% top-line growth rate.
NASDAQ: AMD
Key Data Points
How being smaller than Nvidia is advantageous
Remember when I said above that it was a good thing that the company isn't as big as Nvidia? That's because AMD still has a significant growth runway.
To illustrate, the AI chips market is expected to grow at a 15.7% compound annual growth rate (CAGR) and reach $565 billion by 2032. That means, despite Nvidia most likely owning and keeping a big chunk of that pie, there's still plenty of room for other companies to play and grow as well.
All AMD needs to do is continue to position itself as a viable market alternative to Nvidia (which it already has) and capture a growing slice of that market.
Is Wall Street bullish on AMD?
A consensus among 43 analysts surveyed by barchart.com rates AMD stock a moderate buy with an average score of 4.4 (out of a possible 5). Even better, AMD's high target price has been raised over the last few months. It now stands at $380, suggesting as much as 50% upside potential over the next 12 months from its current price.
Everybody loves an underdog story. AMD went from a company that entered the AI sector late to a rapidly growing contender. Should it succeed in carving out (and keeping) its own space in the AI chips market, it has the potential to become the top-performing AI stock in 2026.
