AMD just crushed earnings, sales up almost 32%, gaming up nearly 70% and the stock still dropped. Why? Because while Wall Street is panicking, AMD just proved it can grow without China, and China’s a billion-dollar market about to reopen.
And here’s the kicker: their AI chips just jumped from $15K to $25K per unit, and demand isn’t slowing; it’s accelerating. That’s not hype, that’s money on the table.
But the real tell? Lisa Su didn’t say a single word about China on the earnings call. That’s not an oversight, that’s strategy. Underpromise now, overdeliver later.
AMD’s Overview
Advanced Micro Devices, or AMD, is one of the biggest names in high-performance computer chips. They make the brains behind everything from gaming PCs to massive data centres. If your computer doesn’t run on Intel or Apple silicon, there’s a good chance it’s powered by AMD.
They’ve built their reputation on delivering great performance at a price that makes sense, and now they’re going after some of the fastest-growing areas in tech. That includes AI chips like the MI300X and MI308, server processors called EPYC, and their popular Ryzen line for everyday PCs.
Now let’s talk about the stock. At the time of recording, AMD is trading around $177, up 46% year-to-date. If you want to follow along, in terms of momentum, AMD has delivered gains for more than 2 decades – with a few speedbumps along the way.
Now, AMD stock is rated a “Moderate Buy” from a consensus of 43 Wall Street Analysts – and it’s honestly easy to see why. With cutting-edge chip technology and a quiet but strategic re-entry into China, the future looks promising
From here, investors can expect an upside potential of around 30% if the stock hits its 52-week high target price of $230. But those numbers only tell part of the story. The real reason AMD is in the spotlight right now is even more compelling.
Why It’s in the Spotlight
AMD is in the news again because it released its second-quarter 2025 financials, and the results blew beyond expectations. Its EPS came in at $0.54, exceeding Wall Street analysts’ consensus estimate of $0.48.
But more importantly, I think, it’s not what they said, but it’s what they didn’t. During the earnings call, CEO Lisa Su made no mention of the China market, even though it’s almost certain the company will secure its licenses to sell there again. She also avoided giving any projections for that market. I think that was very smart. I think it’s a story of underpromising and overdelivering later.
Financials
Now, let’s take a look at what AMD reported in its second-quarter financials.
Sales are up 31.7% from the same quarter last year to approximately $7.7 billion. While its net income rose 299.1% to $872 million, these figures were achieved without making any sales in the Chinese market due to the export restrictions. I think it’s impressive that AMD didn’t just survive losing a major market; it thrived.
Taking a closer look at its segments, its Data Centre Segment is up 14.3% to $3.2 million, the Client and Gaming Segment rose 69.2% to $3.6 million, while its Embedded Segment declined 4.3% to $824 million. The results are no surprise, as they only support AMD’s adoption in terms of CPU and GPU usage.
Honestly, those moves aren’t surprising. AI and gaming hardware adoption is driving big gains in the first two, while Embedded has been softer as demand for certain industrial and automotive applications has cooled off post-pandemic. Despite its slight decline, I don’t think this will significantly affect investors’ bullish confidence, especially since AMD’s financials have been great overall.
So, the question now is: Can AMD’s momentum extend and beat its second-quarter financials?
Growth Catalysts
There is no certainty about its future, but given its historical performance plus the continuous innovation and improvement of its technology, AMD could be a good lottery ticket. Here’s what can propel the stock further
The first reason would still be AMD’s return in the Chinese market, you’d maybe recall that I’d said it before. The restrictions led to AMD missing out on revenue of about $800 million, yet the company’s CEO didn’t forecast its potential revenue in China despite the export license being approved. But no expectations doesn’t mean no upside. Once AMD is clear to export its MI308 chips, hundreds of millions in sales could come back fast.
The second reason would be AMD’s MI400 series.
AMD’s MI400 is shaping up as the long-awaited response to NVIDIA’s most powerful AI GPUs. Unveiled at AMD’s ‘Advancing AI’ event, the MI400 is on track for a 2026 release. If the company hits its timeline, it could be a big catalyst that could shift the market share in high-value AI workloads.
The last reason would be a price hike.
Rumours are circulating that AMD’s MI350 retail price will be increased by 70%, from $15,000 to $25,000. While it may seem steep, remember that this chip isn’t for the casual or gamer buyers. It’s made for the bigger hyperscalers, a market that is booming and shows no signs of slowing. If the reports are true, this move could boost AMD’s profit per unit, and I don’t think it will hurt demand one bit.
Think about it like coffee. For years, everyone just grabbed Starbucks. It was everywhere, it was easy, it was the default. Then, smaller coffee shops started serving better beans, fresher roasts, and charging less. At first, people stuck with Starbucks out of habit… but once they tried the alternative, they realised they were overpaying for average.
Nvidia is Starbucks, the established brand everyone defaults to. AMD is that new speciality shop brewing something just as strong, for less, and winning over customers one cup at a time.
Risks & Red Flags
It might look like everything’s lined up perfectly for AMD, but that’s not the whole story.
While AMD’s return in China is making headlines, AMD, together with NVIDIA, have reportedly struck a deal with the U.S. government to pay 15% of its China AI chip revenue in exchange for export licenses.
Now, it may seem like a good deal because it unlocks the doors to China’s market – but it could also be a double-edged sword. In the long run, the U.S. Government could mean margin pressure. And if competition beats AMD or demand underwhelms, it could become less profitable, or even lead to losses.
The next risk would be that AMD is juggling a lot of pretty big projects at the same time.
The company is working on its MI400 series, Helios AI Full-Rack System, a potential MI500 Series, and other new chip products, which are set to be released in 2026 or 2027. But with so many ambitious launches stacked up, any delay could let competitors tighten their grip on the AI market and quickly kill AMD’s current momentum.
Valuation Breakdown
With my case scenarios out of the way, let’s now have a look at the stock’s valuation.
Comparing AMD to its industry peers, AMD is trading at about 64 times trailing earnings and 53 times forward earnings which is not cheap, and it’s even a bit higher than Nvidia on both counts. But the story doesn’t end there. AMD’s price-to-sales ratio is 10.8, while Nvidia’s is 34. That means investors are paying much less for each dollar of AMD’s revenue than they are for Nvidia’s. The reason could be that AMD’s profit margin is only 6%, compared to Nvidia’s 56%, and its return on equity is also weaker.
I think that the discount makes sense right now, but not for long if AMD can improve its profitability even just a little. That could quickly shift the stock from being fairly priced to looking undervalued – but the opposite could also happen.
Who Should Buy This?
With that, I see AMD as a long-term investment – a great addition for those who can endure price swings through a 5 or even 10-year holding period. Its technology is promising, and I can honestly see it competing against NVIDIA.
But the path to profitability could be shaky, and that could scare many investors, which I understand, as I have been there before. But, if you’re like me, who likes to take calculated risks, then I think AMD could be a good holding.
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