Advanced Micro Devices (AMD) has gained more than 100% year to date, according to Yahoo Finance at the time of writing, Friday morning, May 15. Meanwhile, the SPDR S&P 500 index (SPY) is up slightly below 10% in the same period.
AMD has outpaced the S&P 500 by a huge margin. That is impressive, but what is driving these gains?
The sentiment toward the stock has changed significantly following the stock’s dip after the February earnings report.
Several key news items have contributed to the stock’s rally.
- At the end of February, AMD expanded its partnership with Meta.
- Bank of America revised its server CPU sales forecasts in April.
- Intel’s Q1 earnings, reported on April 23, boosted confidence in the semiconductor sector.
- Following Intel’s earnings, AMD reported its earnings on May 5, helping to sustain the momentum from the ongoing sentiment that the AI boom will drive further growth.
AMD Q1 GAAP net income grows 95% year over year to $1.38 billion
AMD Chair and Chief Executive Officer Lisa Su touted strong growth during the earnings call.
“Earnings grew more than 40%, and free cash flow more than tripled to a record $2.6 billion, driven by significantly higher sales of EPYC CPUs, Instinct GPUs, and Ryzen processors. These results mark a clear inflection in our growth trajectory and a structural shift in our business.”
Su was referring to Non-GAAP earnings per share, which grew 43% year over year to $1.37, and not GAAP net income growth.
She continued by explaining that the growing CPU demand driven by AI is very real.
“Turning to our segments, data center revenue increased 57% year-over-year to a record $5.8 billion, led by strong demand for our EPYC CPUs and Instinct GPUs. In server, we delivered our fourth consecutive quarter of record server CPU revenue. Revenue increased more than 50% year-over-year, with sales to both cloud and enterprise customers each growing more than 50%.”
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AMD provided guidance for Q2 2026:
- Revenue of $11.2 billion ± $300 million
- Non-GAAP gross margin of approximately 56%
Goldman Sachs revamped its AMD price target following the earnings report.
AMD’s flagship global AI event, “Advancing AI 2026,” is set for July 22-23, 2026.
Bank of America raises AMD stock price target
In a research note from May 13, shared with me, Bank of America analyst Vivek Arya and his team updated their forecast for the total addressable market for AI data center systems and their opinion on AMD stock.
The team raised its 2030 AI data center systems total addressable market (TAM) outlook to approximately $1.7 trillion from $1.4 trillion.
As part of their new data center TAM, analysts also raised their AI accelerator outlook to approximately $1.2 trillion from $1.0 trillion, based on increased hyperscaler custom Application-Specific Integrated Circuit shipments.
More Tech Stocks:
- BofA resets Google stock price target after earnings smasher
- Bank of America resets Microsoft stock forecast after earnings
- Goldman Sachs resets Nvidia stock forecast ahead of earnings
Analysts raised their data center server CPU outlook to $110 billion from $80 billion, and AI networking outlook to $316 billion from about $240 billion. They expect CPUs in their new standalone racks to work in tandem with existing GPU-CPU compute racks, and SRAM-based ultra-low-latency memory racks to coexist with HBM-based GPU racks.
Arya reiterated a buy rating for AMD stock and raised the target price to $500 from $450, based on a 42x multiple of his 2027 non-GAAP EPS estimate.
He believes the price target is justified, given the recent increase in CPU industry strength, the July analyst day event (Arya was likely referring to Advancing AI 2026), and AMD’s potential for additional GW data center wins without warrant requirements.
Analysts noted downside risks for AMD:
- Execution on the first rack-scale product (MI400 Series)
- Timing/magnitude of Middle East AI projects
- The lumpy nature of consumer and enterprise spending, which could create delays in the acceptance and success of new products
- High reliance on one outsourced manufacturing partner
- Maturity of the current game console cycle
Upside risk:
- Greater share-gain potential in the PC and server processor market compared to competitors.
