A Look at AMD's Valuation After Analyst Upgrade and Landmark IBM Quantum Partnership

When big news hits a stock like Advanced Micro Devices (AMD), it is only natural for investors to wonder if this is the right moment to act. Just this week, AMD’s shares jumped after receiving a key upgrade from Truist Securities and announcing a high-profile partnership with IBM. The upgrade was driven by rising demand for AMD’s data center and AI hardware, while the IBM collaboration is set to open doors in quantum-centric supercomputing, an area that could shape the future of AI, scientific research, and more.

These developments build on momentum that has already made 2025 a strong year for AMD, with the stock up 39% year to date. This rally has outpaced many peers, reflecting both excitement about AI chip opportunities and AMD’s growing importance in key markets like data centers. While recent quarters have not been flawless, including some revenue pressures and challenges from export controls, the company has consistently posted double-digit revenue and profit growth, keeping investors upbeat about its potential.

With so much positive news and a stock price that has climbed sharply, the big question is obvious: is AMD still a buy at these levels, or has the market already priced in the next wave of growth?

Most Popular Narrative: 7.5% Undervalued

According to the narrative by Bailey, Advanced Micro Devices (AMD) is viewed as undervalued by 7.5%. The fair value estimate is based on significant growth drivers and strategic moves made by the company, leading to a discount relative to the current trading price. The narrative uses a discount rate of 9.7% in its valuation model.

AMD’s recent acquisition of Xilinx could be a game changer. This move offers AMD a chance to greatly broaden its product range and increase its market footprint. Xilinx is a known industry leader for its field-programmable gate arrays (FPGAs), adaptive SoCs, AI engines, and specialized software skills. These capabilities align with AMD’s strategic goals in the growing high-performance and adaptive computing markets, areas where Nvidia is performing incredibly well.

Ready for a deep dive into the thinking behind this bullish call? Discover the one strategic shift and bold management forecast that is shaking up AMD’s valuation. Are you curious about the future financial targets supporting this narrative and how its assumptions differ from analyst consensus? The numbers and arguments presented may change how you view AMD's next chapter.

Result: Fair Value of $180.10 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts. However, fierce competition from Nvidia or future supply chain disruptions could challenge AMD’s growth. These factors may put pressure on its market share and margins. Find out about the key risks to this Advanced Micro Devices narrative.

Another View: What Do Market Multiples Say?

While the previous valuation suggests AMD may be undervalued, examining a common market multiple presents a different perspective. Using this approach, AMD appears much more expensive compared to its industry peers. The question is whether the market is factoring in information not reflected in the numbers, or if optimism is outpacing reality.

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Advanced Micro Devices for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Advanced Micro Devices Narrative

If you see things differently or want to chart your own course, you can easily review the numbers and build a personal outlook in just minutes. Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Advanced Micro Devices.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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