AMD Stock Trades Higher Than Industry at 5.63X P/S: Hold or Fold?
Advanced Micro Devices AMD shares are currently overvalued, as suggested by its Value Score of D.
The stock is trading at a premium, with a forward 12-month Price/Sales of 5.63X compared with the industry's 3.60X.
Price/Sales (F12M)
AMD shares have lost 3.9% in the year-to-date period, underperforming the Zacks Computer and Technology sector's increase of 2.5% and the Zacks Computer – Integrated Systems industry's growth of 16.4%.
The underperformance can be attributed to increasing macroeconomic challenges and uncertainty, which are attributed to higher tariffs. Export controls on certain Instinct GPUs to China posed a regulatory challenge.
AMD Stock Performance
However, AMD is benefiting from its expanding portfolio, accretive acquisitions and rich partner base.
AMD Expands AI Reach With New MI350 GPUs and Key Partners
AMD is strengthening its footprint in the artificial intelligence (AI) market through an expanding portfolio. AMD recently introduced its comprehensive, end-to-end AI platform at the 2025 Advancing AI event, introducing the powerful Instinct MI350 Series GPUs with 4x generational AI compute gains.
The company also showcased its open, rack-scale AI infrastructure and ROCm 7 software stack, enabling scalable, energy-efficient AI deployment. Strategic partners like Meta Platforms META, OpenAI, Microsoft MSFT, and Oracle ORCL highlighted AMD's growing role in powering next-gen AI workloads.
Meta Platforms announced the broad deployment of AMD Instinct MI300X for Llama 3 and Llama 4 inference. Meta Platforms also expressed strong interest in the MI350 Series and is collaborating with AMD on future AI roadmaps, including the MI400 platform.
Microsoft also announced that AMD Instinct MI300X is powering both proprietary and open-source models in production on Microsoft Azure. The collaboration with Microsoft supports scalable AI workloads across the cloud.
Oracle Cloud Infrastructure is among the first to adopt AMD's open rack-scale AI infrastructure featuring the MI355X GPUs. Oracle is also building zettascale AI clusters using up to 131,072 MI355X GPUs to support large-scale AI workloads.
AMD Benefits From Expanding EPYC Portfolio
AMD's expanding EPYC portfolio has been noteworthy. The company's strong adoption of fifth-gen EPYC Turin processors and expanding Instinct AI accelerator deployments across hyperscalers and enterprises have also been major growth drivers for its success.
EPYC processors are now deployed by all top 10 telecom, aerospace, and semiconductor companies. These processors are also gaining momentum in automotive, manufacturing, and energy sectors.
Building on this momentum, the company recently announced that Nokia has adopted its fifth-gen EPYC 9005 Series processors for the Nokia Cloud Platform.
These processors will enhance performance per watt for containerized workloads, which are important to 5G Core, edge, and enterprise applications. This integration supports telecom networks in meeting rising data demands while improving energy efficiency and reducing environmental impact.
AMD is also benefiting from accretive acquisitions to strengthen its AI ecosystem and bridge the technological gap with NVIDIA in the race for AI dominance. Exiting first-quarter 2025, AMD completed its acquisition of ZT Systems, combining its leadership in systems and racks with AMD's powerful GPUs, CPUs, networking silicon, and open-source software to tap into the $500 billion data center AI accelerator market by 2028.
AMD's Q2 Guidance Unimpressive
Despite an expanding portfolio and a rich partner base, AMD is expected to be hurt by export restrictions on GPUs to China, which will be a headwind and stiff competition from NVIDIA.
AMD expects second-quarter 2025 revenues of $7.4 billion (+/-$300 million). At the mid-point of the revenue range, this represents year-over-year growth of approximately 27%. AMD expects approximately a $700 million reduction in second-quarter 2025 revenues due to halted MI308X shipments to China.
AMD's Earnings Estimates Trend Downward
The Zacks Consensus Estimate for AMD's second-quarter 2025 earnings is currently pegged at 56 cents per share, which has decreased 13.8% over the past 30 days, indicating a year-over-year decline of 18.84%.
The consensus mark for second-quarter 2025 revenues is pegged at $7.41 billion, indicating year-over-year growth of 27%.
Conclusion: Hold AMD Stock for Now
AMD's expanding portfolio, strategic acquisitions and rich partner base are expected to improve its top-line growth.
However, its near-term prospects are dull due to macroeconomic uncertainties and stiff competition, particularly from NVIDIA in the cloud data center and AI chip markets. The growing demand for custom AI chips, offered by companies like Broadcom, is increasing concerns over market share. Stretched valuation also remains a concern.
AMD currently has a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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