Advanced Micro Devices' stock has gotten ahead of its business.
Advanced Micro Devices' stock has gotten ahead of its business.
Adanced Micro Devices (AMD -5.96%) investors have enjoyed some incredible gains during 2026. Currently, AMD is the ninth-best-performing component of the S&P 500, returning about 160% so far this year. While that figure was closer to 200% before the most recent sell-off, I think this is a wake-up call for most investors.
The reality is that AMD's stock got way too ahead of itself, and its valuation far outpaces its growth expectations. That is a major red flag for investors, and there are a few items investors need to keep an eye on as to when AMD could be a good buy again (hint: It won't be for a while).
AMD is gaining ground, but not fast enough
The entire AMD investment thesis circles around AMD catching up to Nvidia (NVDA -1.43%) and taking market share. On the surface, it appears that AMD is making headway. It has huge projects like OpenAI's computing cluster, which is starting to be delivered, and is powering Meta Muse from Meta Platforms (META -3.72%). This has all led to stronger growth for AMD, with its data center division reporting $6.7 billion in revenue and growing by 107%. Overall, this helped the company grow its revenue 50% year over year to $11.5 billion in Q2.
AMD Advanced Micro Devices
$528.75-$33.48 (-5.96%)
NASDAQ · As of 4:00 PM ET 10/16/26
Those are strong results that should be celebrated, but the problem is, it just isn't enough to catch Nvidia. During Q2, Nvidia's data center revenue reached $89 billion, up 117% year over year. Overall revenue rose to $96.2 billion, up 106% year over year. While AMD appears on the surface to be doing better, the reality is that Nvidia's lead is widening.
What makes matters worse is that Nvidia's Q2 results don't include any revenue from its upcoming generation of Vera Rubin architecture chips. This new generation promises major improvements, and they also cost more than previous generations. This will further exaggerate Nvidia's lead over AMD and eliminate the thesis that AMD is catching up.
Averytin News Financial update.