Advanced Micro Devices (AMD 3.93%) reported substantial revenue and earnings growth when the company announced its fourth-quarter results on Feb. 3, 2026. However, the semiconductor stock plunged by more than 20% amid concern about AMD's weaker-than-expected first-quarter 2026 guidance.
These sharp declines often present significant buying opportunities for investors. Should you buy AMD stock after its steep sell-off? Here are three reasons why I think the answer is a resounding "yes."
NASDAQ: AMD
Key Data Points
1. The data center business is at an inflection point
AMD projected Q1 revenue to increase by 32% year over year to around $9.8 billion, plus or minus $300 million. However, this revenue forecast reflects a sequential decline of roughly 5%, driven primarily by seasonality with the company's client (desktop and notebook PC processors), gaming, and embedded segments. Sales for these segments typically decrease following the holidays in the fourth quarter.
The company's data center revenue will grow briskly in Q1, though, despite lower sales in China due to what AMD CEO Lisa Su described as a "very dynamic situation" related to U.S. trade policies. Su noted that AMD's data center business is at "an inflection point."
In particular, revenue for the company's MI450 GPU is expected to ramp up significantly later this year. Importantly, Su doesn't think that supply constraints will get in the way of AMD's data center growth.
AMD projects overall data center growth of more than 60% annually over the next three to five years, including in 2026. Concerns about lighter guidance for Q1 appear to be overblown, in my view.
2. CPU business is booming
While GPUs for data centers are largely driving AMD's growth, the company's CPU business continues to quietly mint money. AMD's client segment revenue soared 34% year over year in Q4 to a record $3.1 billion. The company reported record server CPU sales in the quarter to both cloud and enterprise customers. AMD ended 2025 with its highest-ever server CPU market share.
KeyBanc (KEY +0.31%) analysts recently noted that AMD's Turin CPUs are nearly sold out for 2026. The demand for these processors is surging with the rapid ramp-up of artificial intelligence (AI) infrastructure spending among hyperscalers, including Amazon (AMZN 4.36%), Google parent Alphabet (GOOG 0.26%) (GOOGL 0.20%), and Microsoft (MSFT 4.98%).
Image source: Getty Images.
3. Valuation reset
Even after the recent plunge, AMD might seem expensive at first glance. Its shares trade at 38 times forward earnings. But while it would be a stretch to call AMD a value stock, the sell-off achieved a valuation reset that makes the chipmaker much more attractive.
I think that's especially true considering AMD's growth prospects. The stock's price-to-earnings-to-growth (PEG) ratio of 0.52, which is based on Wall Street's five-year earnings growth projections, underscores this point.
