AMD Stock To $330?

Forbes

01-08-2025

Could AMD stock (NASDAQ:AMD) reach $330 in the next two years? There's a good chance of this happening. How? Consider this, just about four months ago, at the end of April 2025, AMD stock was trading at around $80 levels and has seen a massive rally to close to $180 per share currently. Looking at the valuations, AMD stock trades at about 55x trailing earnings and just about 45x projected 2025 earnings.
Is this pricey? No. Especially if you consider AMD's steadily expanding earnings, growing share of the CPU market, and most importantly, the long-growth runway for the artificial intelligence market. In the scenario below, we use AMD's revenues, profitability, and valuation multiples to demonstrate a potential path to a $ 300-plus stock price in the near future.
AMD's GPUs Can Drive Revenue
AMD's revenues have risen considerably from $6.7 billion in 2019 to about $26 billion in 2024, an annual growth of over 31%, and the momentum can hold up. Consensus projects a close to 25% growth for 2025. However, there is a real opportunity for AMD to grow its sales at an average annual rate of close to 35% for the next two years, led by growth in accelerated computing space and its new GPUs. Its revenues could move from an estimated $32 billion in FY'25 to around $58.3 billion by FY'27, or an over 80% increase. Several trends could drive this continued growth. Separately, if you are looking for potential gains with reduced volatility compared to individual stocks, the Trefis High Quality portfolio offers an alternative—having surpassed the performance of the S&P 500 and produced returns of over 91% since its inception.
More capable AI chips from AMD: AMD is likely to see strong tailwinds from the generative AI trend, as graphics processing units have become the de facto chips for running AI-related workloads. To be sure, Nvidia makes the best AI chips in the market and has a hardware and software ecosystem that is well entrenched with big cloud providers. However, there remains a considerable opportunity for AMD. At its AI Day earlier this year, AMD unveiled its latest MI350 lineup, which it says will deliver 4x the AI compute performance of its predecessor. Beyond hardware, AMD is building out its AI software and systems stack. These moves could also strengthen AMD's ROCm software stack, which takes an open-source, standards-based approach, a contrast to Nvidia's proprietary CUDA ecosystem. AMD appears confident about its AI products. Earlier this week, there were reports that the company would bump up pricing on its Instinct MI350 AI GPUs from $15,000 to $25,000 - a 70% hike (related: See how artificial general intelligence can 2x Nvidia stock).
Inference Can Drive AI Market Share: As a larger mix of AI workloads will shift to inference - essentially using the built models in real-world applications - where efficiency and cost matter more than brute force computing power, AMD could see gains. Costs are also becoming a concern for end-customers of AI chips, as Nvidia's strong pricing power has pushed its net margins above 50% in recent quarters. This could benefit AMD, as customers look for more affordable alternatives to build out data centers quickly. This trend is already playing out. For example, Oracle chose AMD's accelerated computing chips to power its latest super cluster for high-intensity AI workloads, after testing showed AMD's GPUs delivered low latency and strong performance at a competitive price. Even after the reported price hike, AMD's MI350 would still undercut Nvidia's entry-level Blackwell B200, while offering superior specs (related: AMD Stock's Big AI Opportunity Is Taking Shape).
Overall, there is plenty of room for growth. AMD estimates that the market for AI accelerator chips will reach approximately $400 billion in 2027. HSBC projects that AMD could see AI-related sales exceed $15 billion by 2026, compared to over $5 billion in 2024. The large market size and continued momentum should make a 35%+ growth in total revenues over the next two years a real possibility.
Higher-End Products Can Drive Margins
Combine this robust revenue growth with the fact that AMD's adjusted net margins (net income, or profits after all expenses and taxes, calculated as a percent of revenues) are on an improving trajectory - they grew from levels of about 11% in FY'19 to over 21% in FY'24 as the company sees better economies of scale and a more favorable product mix skewed toward complex data center products. Margins could potentially trend still higher to levels of about 25%, as AMD sees higher GPU sales with higher economies of scale, improving its fixed cost absorption. Now, combining 25% adjusted net margins, with about $58 billion in revenue, would translate into earnings of about $14.5 billion. That's a roughly 2.7x increase from levels seen in 2024.
Strong Results Mean A Smaller Contraction In Earnings Multiples
Now, if earnings grow 2.7x, the price-to-earnings multiple will shrink by 2.7x to levels of about 21x, assuming the stock price stays the same. But that's exactly what AMD investors are betting will not happen. If earnings expand 2.7x over the next few years, instead of the P/E shrinking from a figure around 55x now to about 21x, a scenario where the PE metric stays at about 40x looks quite likely, as stronger growth and expanding margins give investors more confidence about AMD's future. This would make the growth of AMD stock to levels of close to $330 within the next few years a real possibility. So what about the time horizon for this high-return scenario? While our above example illustrates a roughly two-year time frame, in practice, it won't make much difference whether it takes two years or three, as long as AMD is on this revenue expansion trajectory, with margins holding up, the stock price could respond similarly.
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