Geopolitical tensions in the Middle East have triggered a significant surge in oil prices, raising concerns about a potential slowdown in the U.S. economy. In response to this volatility, the S&P 500 index experienced a sharp decline, falling 5% in March, affecting numerous stocks adversely. However, Advanced Micro Devices (AMD) managed to stand out, experiencing a 2.5% gain over the same period, indicating that investors are maintaining confidence in the company amid broader market challenges.
As the competitive landscape in the data center graphics processing unit (GPU) market evolves, AMD has emerged as a formidable contender against Nvidia, especially in the realm of artificial intelligence (AI) development. This positive sentiment around AMD could contribute to its stock resilience in the upcoming months.
In 2023, AMD began introducing its line of AI GPUs for data centers, starting with the MI300 model. Since its debut, the company has rolled out several new generations of GPUs, garnering interest from major industry players including OpenAI, Oracle, Microsoft, and Meta Platforms. The company is set to launch its MI450 GPUs in the latter half of the year, promising significant performance enhancements. AMD claims that the MI450, when paired with specialized hardware and software in a fully integrated rack system dubbed Helios, will deliver 36 times the performance of previous models such as the MI400 and MI355. This new architecture is also expected to boast 50% more memory capacity than Nvidia’s upcoming Vera Rubin GPU system, which could potentially accelerate AMD’s efforts to catch up to its main competitor.
Meta and OpenAI are positioned to be among the early adopters of the MI450, with plans to utilize AMD GPUs for a cumulative 6 gigawatts of computing capacity over several years. Given that each gigawatt typically requires between 500,000 to 1 million chips, these agreements could translate into revenues amounting to tens of billions of dollars for AMD.
Looking ahead, 2026 is shaping up to be a pivotal year for AMD. In 2025, the data center segment generated a record $16.6 billion in revenue, marking a 32% increase compared to the previous year. This segment accounted for nearly half of AMD’s total revenue of $34.6 billion, underscoring its significance to the company’s overall strategy. CEO Lisa Su has expressed optimism, projecting a potential average growth rate of 60% for the data center business over the next three to five years, starting in 2026, with future revenues in the tens of billions anticipated from that segment alone.
Nonetheless, certain risks loom, particularly concerning OpenAI’s financial capacity to fulfill its commitments to chip manufacturers and cloud providers. With OpenAI reportedly agreeing to $300 billion in computing capacity rented from Oracle and $281 billion from Microsoft Azure, concerns arise about the startup’s ability to sustain these obligations, especially as it operates with only $25 billion in annualized revenue and experiences net losses. Although OpenAI has secured $122 billion in funding to advance its goals, this amount may only cover a fraction of its future commitments.
Fortunately for AMD, its customer base is quite diverse, ensuring it is not overly reliant on any single entity, including OpenAI. However, any shortfall in GPU purchases from OpenAI could impact revenue forecasts set by CEO Su.
Regarding stock valuation, AMD is currently trading at a price-to-earnings (P/E) ratio of 48.7 based on 2025 adjusted earnings of $4.17 per share, indicating a premium compared to the Nasdaq-100 technology index’s P/E ratio of 29.9. The stock’s resilience in March, despite broader market declines, can be attributed to investor optimism surrounding the potential for a significant boost in revenue growth from AMD’s data center segment this year. The current demand for GPUs grants AMD considerable pricing power, likely enhancing the profitability of its data center business as it scales.
Analysts project that AMD’s earnings will rise by 59% to $6.65 per share in 2026, with further growth of 62% to $10.77 per share in 2027. This suggests forward P/E ratios of 30.6 and 18.9, respectively, indicating that the stock could be undervalued at present. As a result, AMD’s prospects for delivering strong returns into 2026 and beyond appear promising.
