Advanced Micro Devices (AMD) is a mammoth semiconductor company, with a market capitalization of $261 billion and nearly $30 billion in revenue in the last 12 months. But despite all that, it’s completely overshadowed by Nvidia (NVDA) in the race to outfit data centers with the best chips powering artificial intelligence (AI).
One area where AMD could thrive is in the desktop computer processing market, where its market share of 32% is at a new high, as it continues to erode Intel’s (INTC) position. Less than a decade ago, Intel held a 9:1 lead, but AMD has carved that down to just a 2:1 advantage since 2016.
Now Nvidia’s making a huge move that could stop AMD’s momentum in its tracks—and at the same time bolster Intel. Nvidia announced it was taking a $5 billion stake in Intel and struck a deal for Intel to design and manufacture custom data center and client CPUs with Nvidia products.
For personal computers, the deal calls for Intel to build and sell x86 system-on-chips (SOCs) that integrate Nvidia RTX GPU chiplets. The companies say the new SOCs will “power a wide range of PCs that demand integration of world-class CPUs and GPUs.”
Will this deal be a deal-breaker for AMD stock?
Based in Santa Clara, California, AMD is one of the most well-known names in the computer and technology sector. The company makes high-performance chips to power CPUs and GPUs, providing infrastructure that allows companies to offer computing programs for the cloud and end devices.
AMD stock is beating the market handily this year, up 33%, and nearly matching Nvidia’s 35% gain in the same period. The stock is also handily beating the 17% year-to-date gain in the Nasdaq 100 Index, which is made up of 100 of the biggest non-financial stocks on the tech-heavy Nasdaq Composite ($NASX).
The companies have a similar forward price-to-earnings (P/E) ratio, both coming in around 41. But when you consider that the mean of AMD’s P/E over the last five years has been 166, thanks to low earnings during its product transition years, the forward P/E looks much more reasonable. And turning to the forward price-to-sales (P/S) ratio, AMD’s 8 is much more palatable than Nvidia’s 21.4.
For the second quarter of 2025, AMD posted revenue of $7.68 billion, up 32% from a year ago. Adjusted net income of $781 million and $0.48 per share was down 31% from a year ago and fell just short of analysts’ consensus estimates by $0.01.
AMD reported strong performance in its client and gaming revenue, which was up 69% from a year ago to $3.6 billion. Revenue for data center sales—the area that Nvidia is particularly dominant in—was up 14% to $3.2 billion.
The company issued third-quarter guidance for revenue to be in a range of $8.4 billion and $9 billion, which at the midpoint would be about 28% growth from a year ago.
AMD is a popular stock, so it gets a lot of attention from analysts. Forty-four are currently covering it, and the consensus sentiment is bullish—27 rate it a “Strong Buy,” one a “Moderate Buy,” and the other 16 say “Hold.”
The stock has a mean price target of $189, suggesting a 17% potential upside, with the most bullish analyst’s target of $230 suggesting a whopping upside of 42% from current levels.
While AMD looks to be attractively valued compared to its historical performance and Nvidia, I think Intel’s deal with Nvidia bears watching. I have every confidence that Nvidia will continue to be the dominant data center provider of high-powered semiconductor chips. But if it can help Intel shore up its CPU business and protect its market share, it could be the biggest headwind AMD faces in years.
On the date of publication, Patrick Sanders had a position in: NVDA. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com