Export Controls And Fierce Competition Will Restrict Future Markets

Key Takeaways

• Regulatory barriers and deglobalization are restricting AMD’s access to crucial global markets, threatening growth and capping future revenue opportunities.
  
• Heightened competition, evolving supply chain risks, and potential industry overcapacity could erode AMD’s margins and expose the company to greater earnings volatility.
  
• Accelerating AI and cloud demand, share gains in server CPUs, strong chiplet innovation, and broad product adoption are driving diversified, resilient, and profitable growth for AMD.

Catalysts

Operates as a semiconductor company worldwide.

• Intensifying deglobalization and stricter regulations on export controls for advanced AI hardware are expected to restrict AMD’s access to large international markets such as China, leading to a significant reduction in long-term addressable market and a direct hit to future revenue growth that cannot be easily offset by domestic or Western demand.
  
• Growing regulatory scrutiny on AI, data privacy, and cross-border technology transfers threatens to limit AMD’s expansion in global markets, especially as governments move to tighten restrictions on AI model diffusion and enforce new compliance standards, potentially capping both top-line revenue and the pace of earnings growth.
  
• Escalating competition from established players like NVIDIA and growing adoption of custom silicon and ARM-based solutions by cloud providers puts AMD at risk of losing market share and eroding pricing power in both the GPU and CPU segments, which could compress gross and operating margins over time.
  
• Persistent reliance on third-party manufacturing, especially TSMC, exposes AMD to rising input costs, supply chain disruptions, capacity constraints, and margin volatility as advanced semiconductor fabrication becomes costlier and more complex, undermining gross margin expansion and capital efficiency.
  
• The rapid build-out of global semiconductor capacity—spurred by aggressive investments from foundries and potential overestimation of long-term AI and computing demand—raises the risk of industry overcapacity, leading to lower average selling prices, excess inventory, and more pronounced earnings volatility for AMD in future cycles.

Advanced Micro Devices Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Advanced Micro Devices compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Advanced Micro Devices's revenue will grow by 10.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 6.4% today to 13.0% in 3 years time.
• The bearish analysts expect earnings to reach $4.5 billion (and earnings per share of $2.52) by about May 2028, up from $1.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 36.2x on those 2028 earnings, down from 97.1x today. This future PE is greater than the current PE for the US Semiconductor industry at 22.5x.
• Analysts expect the number of shares outstanding to grow by 0.26% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.13%, as per the Simply Wall St company report.

Advanced Micro Devices Future Earnings Per Share Growth

Risks

• Sustained and accelerating demand for high-performance computing driven by AI and cloud workloads is providing AMD with a multi-year structural tailwind, supporting significant revenue growth and higher gross margins in its Data Center and Client & Gaming segments.
  
• AMD is successfully gaining share in the server CPU market through its EPYC product line, with broad adoption by all major cloud providers and Fortune 2000 enterprises, which is leading to higher data center revenues and improved operating income.
  
• The ramp of next-gen AI GPUs (MI350, MI400) and expanded AI software ecosystem (e.g., ROCm), along with the ZT Systems acquisition for systems design, are positioning AMD as a credible, rapidly scaling AI infrastructure provider, supporting an expanding total addressable market and potential uplift in net income.
  
• Leadership in chiplet architectures and advanced packaging, along with manufacturing partnerships including TSMC’s US fabs, are enabling AMD to drive performance and efficiency advances, supporting gross margin expansion and operational resiliency.
  
• Recovery trends in the Embedded and semi-custom businesses, alongside robust commercial and gaming PC demand driven by new Ryzen and Radeon products, are broadening AMD’s end-market exposure and diversifying revenue streams, reducing reliance on any single segment and helping to support overall earnings growth.

Valuation

• The assumed bearish price target for Advanced Micro Devices is $76.7, which represents two standard deviations below the consensus price target of $133.98. This valuation is based on what can be assumed as the expectations of Advanced Micro Devices's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $200.0, and the most bearish reporting a price target of just $70.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $34.5 billion, earnings will come to $4.5 billion, and it would be trading on a PE ratio of 36.2x, assuming you use a discount rate of 9.1%.
  
• Given the current share price of $98.62, the bearish analyst price target of $76.7 is 28.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.