Advanced Micro Devices (AMD +0.81%) stock recently received a big upgrade, as Raymond James analyst Simon Leopold slapped a strong buy rating on the semiconductor stock, with a price target of $641.
That represents 33% upside from AMD's current share price, as of this writing.
Leopold's bullish sentiment stems from his optimism that the server CPU market will accelerate over the next few years, reaching $201 billion by 2030.
Here's why he's right to be bullish on AMD stock over the long term.
Image source: The Motley Fool.
AMD's server CPU opportunity is massive
AMD is no stranger to central processing unit (CPU) server sales. The company recently reported $6.7 billion in revenue from its data center segment (which includes CPUs and GPUs) -- an increase of $107% from the year-ago quarter. But Leopold estimates AMD's CPU sales could be the true winner by 2030. And it's all because of agentic AI.
It's no secret that some of the momentum in the AI space has shifted away from graphics processing units (GPUs) to CPUs. Tech companies building AI data centers are allocating some of their spending to CPUs because they are especially well-suited to agentic AI computing. CPUs can use less energy to perform agentic tasks than GPUs, and tech companies, including Alphabet, OpenAI, Meta Platforms, and others, have even designed their own CPUs to run their specific AI models.
The CPU market is growing so quickly that AMD's management upwardly revised its 2030 total addressable market projection for server CPUs twice in the past two quarters -- to its current estimate of more than $220 billion. Its management believes CPUs will now play just as important a role in AI data centers as GPUs have, with CEO Lisa Su saying that the ratio of CPUs to GPUs in data centers will be 1-to-1 -- down from the previous ratio of 1-to-4 or even 1-to-8.
And it's fueling huge growth for AMD's CPU server business. Su said on the second-quarter 2026 earnings call: "In server CPUs with very strong customer demand and improved supply, we now expect server revenue to grow more than 80% year over year in the second half of 2026 and more than 70% for the full year 2027, off a much higher base. Taken together, we now expect data center segment revenue to more than double year over year in 2027."
With such an optimistic growth outlook for server CPUs, it's not all that surprising to see Leopold raise AMD stock's price target and place a strong buy rating on the stock.
And the analyst said that while AMD's peers -- Nvidia, Intel, and Arm -- all have exposure to CPUs, he thinks AMD "offers the strongest combination of direct earnings leverage, data-center positioning and market-share gains."
That's quite a statement considering that rivals like Nvidia have dominated the chip design market for years.
NASDAQ: AMD
Key Data Points
There's no doubt AMD is riding the next AI wave, but its shares are pricey
Despite its decline last month, AMD's share price has accelerated in 2026 and is up 124% year to date. That's great news for AMD shareholders, of course, but it also means that AMD stock is getting pricey. The company's shares have a trailing price-to-earnings ratio of 116, which is a significant premium over the tech sector's average P/E ratio of just 34.
That doesn't mean investors should avoid AMD stock right now, but you should understand that you're paying a premium for its shares. That could make its stock more volatile if there's an industrywide slowdown in AI spending or if the company fails to meet analysts' expectations in upcoming quarters.
Still, with AMD well-positioned in the CPU space, starting a small position or adding to your existing one may not be a bad idea.
