AMD (AMD 3.46%) has been a great stock to own since 2025. Its stock is up around 60% since then, outperforming Nvidia over the same time frame. Up until a few days ago, AMD's stock was up over 100% during the same time frame, but it cratered after the company's fourth-quarter earnings announcement.
If I presented you the numbers, you may question why the sell-off occurred in the first place, as it looks like AMD has started the turnaround it told investors about months ago. Is this your buying opportunity? Or should you stay patient for a deeper decline?
Image source: AMD.
AMD's data center sales are accelerating
One thing that has held AMD back during the artificial intelligence (AI) arms race is its lack of focus on AI. Unlike Nvidia, which gets around 90% of its revenue from data center sales, AMD is more evenly spread out. During Q4 2025, 52% of sales came from data center revenue, while 38% came from its client and gaming division, and another 9% came from its embedded process division (totals don't add up to 100% due to rounding errors). Because AMD isn't as leveraged to data center sales, it isn't participating as much during one of the biggest technological shifts we've ever seen with generative AI.
NASDAQ: AMD
Key Data Points
However, AMD is starting to increase its data center growth rate.
During Q4 2025, its data center revenue increased at a 39% year-over-year pace. That's solid acceleration from Q3 2025's 22% growth rate, and Q4 could be the quarter that we look back on as the turning point for AMD. However, this is a small growth rate compared to what management thinks it will get to. Furthermore, sales to China are starting to return now that the Trump administration is starting to allow exports there again. This will be a solid boost throughout 2026 and beyond.
Back in November, AMD released five-year guidance regarding each of its business units. During that release, it told investors that they could expect a 60% compound annual growth rate (CAGR) in the data center division and a 10% CAGR for the other two. Combined, that would lead to a 35% CAGR companywide through 2030. While AMD fell slightly short of those projections during Q4, it still did an excellent job and is showing greater progress toward meeting those goals.
But why did AMD's stock slip?
AMD's stock was expensive entering the quarter
Before the sell-off, AMD's stock was trading for nearly 40 times forward earnings; now it trades for about 31.
AMD PE Ratio (Forward) data by YCharts
Considering AMD's track record and relative growth rate, there was no reason for AMD's stock to be valued that high, so a pullback was due. Furthermore, rival Nvidia trades for just 24 times forward earnings despite a greater market share and a stronger growth rate. So, to call AMD's stock cheap here is a fallacy, in my opinion.
Still, I think it could deliver strong growth moving forward, especially if its data center division's revenue growth accelerates toward that 60% growth figure management guided for last year. For 2026, Wall Street analysts expect 34% revenue growth, and in 2027, that figure rises to 37%. Both of those are in line with the 35% overall CAGR management expects to deliver, so the analyst community believes that AMD can deliver on its promise.
I'm still more bullish on Nvidia than I am AMD, but I think AMD is a worthy buy at this point in time as an alternative pick in the AI space. The AI build-out is far from over, and AMD could still deliver impressive growth despite missing out on the initial stages.
