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Key Takeaways

• AMD CEO Lisa Su projects the company's data center business will grow at 60% CAGR over the next five years, with overall company CAGR of 35%.
• AMD’s stock dropped 19% in the past month despite being up 68.9% year-to-date, creating a potential buying opportunity.
• The recent stock price of around $204 could reach $600 in five years based on projected earnings of $20+ per share.
• Discounted Cash Flow analysis suggests AMD is undervalued by 48%, with the intrinsic value estimated at $393 per share.
• AMD maintains a more balanced revenue mix than Nvidia, with data centers representing 49% vs. Nvidia’s 88% concentration.

AMD shares have experienced a volatile ride lately. The stock climbed 68.9% year-to-date but pulled back 19.4% over the past month.

At the company’s Financial Analyst Day, CEO Lisa Su unveiled growth projections that caught Wall Street’s attention. The numbers suggest AMD is positioned for substantial expansion in the coming years.
 

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Image Source: KnockoutStocks

The stock has recently traded at around $204 per share. Based on the company’s projections, shares could reach $600 within five years. AMD reported data center revenue grew 22% year-over-year in Q3 2025. That growth rate is about to accelerate dramatically if management’s forecasts prove accurate.

The company projects data center business will expand at a 60% compound annual growth rate over the next five years. This represents a massive jump from current growth levels. For comparison, AMD’s embedded and gaming segments are expected to grow at a more modest 10% CAGR. The company’s overall growth target sits at 35% CAGR.

Management expects non-GAAP earnings per share to exceed $20 by the end of this five-year period. At a 30 times earnings multiple, that translates to the $600 price target.

AMD maintains a more diversified revenue structure than its main competitor Nvidia. Data centers accounted for 49% of AMD’s Q3 revenue. Client and gaming segments contributed 44% of revenue. Embedded processors made up the remaining 9%.

Revenue Mix Provides Buffer Against Market Shifts

This balanced approach differs from Nvidia’s heavy data center concentration of 88%. The diversification offers AMD some protection if AI spending slows. However, AMD would still feel pressure from any data center slowdown given its substantial exposure. Management clearly doesn’t see that happening based on their aggressive growth targets.

The gap between AMD’s valuation and analyst projections has sparked debate among investors. A Discounted Cash Flow analysis values AMD’s intrinsic worth at $393 per share. That figure sits 48% above the recent market price. The analysis uses current free cash flow of $5.57 billion and projects growth to $30.92 billion by 2029.

Valuation Metrics Show Mixed Picture

Price-to-earnings metrics tell a different story. AMD trades at a PE ratio of 106x compared to the semiconductor industry average of 34x. The company’s peer group average stands at 64x. AMD’s Fair Ratio calculates to 63x, suggesting the stock has recently been trading above fundamental levels.

Some analysts set fair value estimates as low as $137 due to competition and regulatory concerns. Bull case scenarios push valuations closer to $277 based on AI and data center momentum.

AMD’s product lineup continues to evolve as the company works to close the gap with Nvidia. Recent chip releases aim to position AMD as a viable alternative for AI computing. The software capabilities have improved to make AMD’s hardware more competitive. Time will tell whether these efforts translate into meaningful market share gains.

AMD scored just 2 out of 6 on key valuation checks. The stock sits 26.7% below the bull case fair value of $277. The stock's market cap stands at $332 billion, with shares trading in a 52-week range of $76.48 to $267.08. Average daily volume runs around 58 million shares.

AMD’s free cash flow projections show steady expansion through 2029. Analyst forecasts reflect confidence in the company’s ability to execute on its AI strategy. The 60% data center growth target would shift AMD’s revenue mix dramatically. Data centers would dominate the business if other segments grow at just 10% annually.

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