Tech stocks are leading the market's rally in 2026. While the S&P 500 has risen by around 10% this year, the Technology Select Sector SPDR ETF is up by 34%. Tech continues to be a hot trend, with spending on artificial intelligence (AI) remaining high among businesses.
One chip stock that's been especially hot this year is Advanced Micro Devices (AMD -1.47%). The company's latest chips have been generating strong demand, and the hope is that they can take significant market share from rival Nvidia.
But with the tech stock already up more than 150% this year, are you better off waiting for a price pullback, or is AMD still a good buy right now?
Image source: Getty Images.
Why the market may remain bullish on AMD
While AMD's stock has been red hot this year, there could still be further catalysts ahead that drive its value even higher. The company's growth rate has been accelerating, and with its new MI450 chip and Helios rack-scale systems exceeding early expectations, its results may look even stronger as the year progresses.
In May, when the company reported its first-quarter results, CFO Jean Hu pointed out not only the impressive 38% growth the business recently achieved, but also the more promising results that may lie ahead.
"These results highlight continued momentum and execution across the business, demonstrating the leverage in our operating model as we invest for accelerated growth while expanding profitability"
If AMD posts stronger-than-expected results this year, then the stock may easily reach a $1 trillion valuation in the near future (its market cap is currently at just under $900 billion). However, any earnings beat or guidance raise may need to be significant, given how expensive the stock is today.
NASDAQ: AMD
Key Data Points
AMD's high valuation already prices in a lot of future growth
AMD wasn't a cheap stock to own even before its surge in value this year. Now, however, at a price-to-earnings multiple of around 180, its valuation has reached astronomical levels. Although its growth prospects are encouraging, at a multiple that high, investors are effectively paying for much of that future growth. That's why, while AMD's stock may rise if it exceeds expectations in upcoming quarters, the bar will undoubtedly be set high, and thus it may not be a sure thing that it comes in better than analyst and investor expectations.
For that reason, I would hold off on buying AMD stock right now because it possesses more downside risk than potential upside at its current valuation.
