Shares of chipmaker Advanced Micro Devices (AMD +3.43%) ripped higher last week amid a broader chip-stock rally after blowout quarterly reports from Intel and Texas Instruments.
The stock rose to levels above $350 at one point on Friday, briefly putting AMD up about 65% in April alone. Even after a pullback early this week, shares are up about 49% year to date, obliterating the S&P 500's 4% gain.
Sure, AMD's recent business results have been impressive. But have they been good enough to justify a rally this big?
With this backdrop in mind, and with AMD scheduled to report on May 5, what should investors make of the chipmaker's stock ahead of the company's first-quarter earnings? More specifically, is it a buy, sell, or hold?
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A business firing on all cylinders
There's no real debate about whether AMD's underlying business is doing well. AMD closed out 2025 with record fourth-quarter revenue of $10.3 billion -- up 34% year over year. And its full-year revenue of $34.6 billion was also up 34% year over year. In addition, the company's fourth-quarter non-GAAP (adjusted) earnings per share notably jumped 40% year over year.
And the company's data center segment is gaining momentum, showing how AMD is tapping into the artificial intelligence (AI) boom. Revenue in the segment hit a record $5.4 billion in Q4. This translated into a 39% year-over-year increase -- a significant acceleration from 22% growth in Q3. Strong demand for the company's EPYC server CPUs, paired with the ramp of its Instinct GPU shipments, has been driving the segment.
Looking ahead, management's first-quarter outlook calls for revenue of about $9.8 billion, plus or minus $300 million -- implying year-over-year growth of about 32%.
But the real excitement could come later in 2026.
AMD CEO Lisa Su said on the company's fourth-quarter earnings call that the chipmaker is "in active discussions with other customers on at-scale multi-year deployments starting with Helios and MI450 later this year."
And potential deals like this sit on top of a previously announced multi-year partnership with OpenAI to deploy 6 gigawatts of Instinct GPUs.
Further, the company announced another 6 gigawatt partnership with Meta Platforms in late February.
If the results Intel and Texas Instruments reported last week offer any indication of AMD's momentum during this chip cycle boom, the company may report first-quarter results well ahead of its guidance. Intel's first-quarter revenue topped consensus by more than $1 billion, and Texas Instruments posted its largest single-day stock gain in roughly 25 years following the company's blowout results.
But what about valuation?
But things get murkier once investors start looking at AMD's valuation.
As of this writing, AMD trades at a price-to-earnings ratio of more than 123. And even its forward price-to-earnings ratio, which looks at its price as a multiple of analysts' consensus earnings forecast over the next 12 months, is 50. And keep in mind that these are multiples on top of elevated earnings during a cyclical sales surge.
Sure, this AI chip cycle may be unlike anything we've ever seen before, but the stock's current valuation still seems to be throwing caution to the wind.
Of course, this isn't just an AMD issue. Many chip stocks have gone parabolic over the past month, leaving their valuations at questionable levels. Across the chip sector, valuations are arguably starting to price in a near-perfect, multi-year continuation of the AI build-out.
Yet the semiconductor industry, of course, has always been cyclical. And there's no clear reason to assume this cycle will play out differently. Sure, it's clear that this cycle will be bigger than any one we've ever seen, but it will still likely be a cycle -- just one that is more significant and likely stretched out longer.
NASDAQ: AMD
Key Data Points
This bubble-like excitement about the AI boom puts AMD shares in a risky situation. Even modest signs of digestion in hyperscalers' capital expenditure plans for the AI build-out could quickly pressure sentiment toward AI stocks. Then there's the competitive backdrop -- not only Nvidia in AI accelerators, but Intel's own reemergence in server CPUs after its strong quarter. If narratives like these turn against AMD, the stock's valuation has a lot of room to come down -- and it could do so quickly.
To be clear, none of this means AMD's first-quarter report early next month won't impress. The chipmaker's data center momentum and partnerships with OpenAI and Meta give management plenty to talk about -- and a better-than-expected bullish forecast from Su could be exactly what investors need to help justify the stock's extraordinarily high valuation.
But buying or holding here means paying up for optimism already baked into the share price. Even with a great underlying business, this seems more like a moment to stay on the sidelines than to chase shares that have already more than tripled in 12 months.
So, is the stock a buy, sell, or hold? I'd argue it's a sell.
