This year has been quite challenging for Advanced Micro Devices (AMD). Currently, investors have seen an 18% drop in chip maker shares for 2025. However, the latest quarterly report suggests that perhaps they might be misjudging the situation by not seizing the opportunity to buy in after the recent setbacks.
On May 6th, AMD revealed its first quarter results, which were surprisingly better than what analysts were predicting. Despite facing hurdles due to export restrictions on advanced artificial intelligence (AI) chips, the company’s outlook still exceeded Wall Street’s expectations.
If we dig deeper into AMD’s numbers, it becomes clearer why it’s a good time to consider adding this semiconductor stock to your portfolio.
1. AI is driving growth in AMD’s data center business
AMD’s revenue grew by 36% year-over-year, reaching $7.444 billion in the first quarter, with adjusted revenue jumping 55% to $0.96 per share. The data center segment played a vital role in this growth, contributing almost half of the company’s revenue and soaring by 57% compared to the same period last year.
Management highlighted the strong demand for server central processing units (CPUs) and graphics processing units (GPUs) as a key driver for the data center’s success. The need for these chips is climbing steadily, especially with the rising demand for AI workloads in the cloud.
AMD specifically noted that data center GPU sales had grown significantly year-over-year, largely credited to the adoption of the MI300 series chip. The company attracted not only new clients but also increased business from existing cloud customers. As CEO Lisa Su mentioned on the conference call:
Several hyperscalers have expanded their use of instinct accelerators to handle increased AI traffic. We also added several major cloud and enterprise customers this quarter, including one of the leading developers of frontier models utilizing our GPUs for critical inference tasks.
Moreover, AMD’s gained market share in the server CPU sector, which also fueled growth in data centers. Their server CPU market share increased by 2 percentage points to 25.1% in the fourth quarter of 2024, maintaining that trend into the first quarter of this year.
Significant cloud providers like Amazon, Oracle, and Google have integrated Q1’s AMD EPYC server processors into multiple cloud instances. AMD’s management is optimistic about continuing to capture more market share in the server CPU market with the upcoming EPYC processors.
This positions AMD well to take advantage of the anticipated growth in the AI data center market, expected to grow by 28% annually by 2030—though that’s not the only reason it may be a wise time to invest in this stock.
2. AI PCs boost client processor segment
According to IDC, global personal computer (PC) shipments increased around 5% year-over-year in Q1 2025. In this context, AMD witnessed a remarkable 68% rise in client processor revenue, totaling $2.3 billion, fueled by strong demand for Ryzen CPUs in both desktops and laptops.
The company reported a sales surge of over 50% in desktop inventory during the first quarter. Additionally, sales of its AI-enabled PC processors rose by more than 50% sequentially. The commercial PC segment also emerged as a significant growth factor, boasting a 30% increase in sales from last year.
This growth isn’t surprising, given that AMD is rapidly bringing on new commercial PC customers, thus increasing processor-driven systems by 80% this year. AMD is optimistic about sustaining growth at a pace that outstrips the overall PC market, largely due to heightened demand for desktops, laptops, and commercial processors.
So, it’s clear why AMD’s future outlook points to continued strong growth.
3. Guidance and forecasts suggest secure stock buying now
AMD is projecting $7.4 billion in revenue for the midpoint of Q2 2025, marking a 27% increase from the same time last year, which is higher than the consensus estimate of $7.25 billion. Notably, AMD anticipates a $700 million revenue hit this quarter due to chip export restrictions to China.
Nevertheless, the overall positivity in the AI chip market and broader customer adoption across servers and PCs should help offset these challenges and foster year-over-year growth. Better yet, AMD expects a remarkable 54% increase in revenue compared to the same quarter last year, driven by higher margins from Ryzen CPUs and data center chips.
Given this outlook, investors can feel confident that AMD will maintain healthy growth moving forward. Consensus suggests that AMD revenues will rise 21% in 2025, followed by an impressive 48% increase the next year. So, considering AMD is trading at a 24x forward revenue—and compared to the 29 times revenue of the NASDAQ-100 Index—buying AMD seems like a smart move right now.
Moreover, as noted by Yahoo!, the company’s projected annual revenue growth rate for the next five years gives it a price/earnings to growth (PEG) ratio of just 0.49, indicating it may be undervalued even when accounting for its growth potential. Therefore, investors interested in growth stocks that align with significant trends like AI should definitely consider AMD before it potentially takes off.
