AMD is a leading American semiconductor company specializing in high-performance computing, graphics technologies, and AI accelerators for data centers, personal computers, and gaming devices. Headquartered in Santa Clara, California and founded in 1969, AMD operates globally and is notable for innovations in processors (EPYC, Ryzen), Radeon graphics cards, and Instinct AI products.

AMD, in partnership with Cisco and HUMAIN, has announced a landmark joint venture to develop up to 1 gigawatt (GW) of AI infrastructure in Saudi Arabia by 2030, reinforcing the Kingdom’s ambitions to become a global leader in AI solutions. The initiative will start with an initial 100 MW deployment in 2026, featuring AMD Instinct™ MI450 Series GPUs, supporting HUMAIN’s state-of-the-art data centers and powered by renewable energy. As the exclusive technology partner, AMD will establish an AMD Center of Excellence in Saudi Arabia, targeting local innovation and accelerating AI ecosystem growth.

Consistent growth

AMD maintained steady performance over FY 21-24, achieving a revenue CAGR of 16.2%, reaching $25.8bn in FY 24, driven by explosive growth in its Data Center segment, especially the ramp-up of AMD Instinct™ GPU shipments. However, EBIT dropped at a CAGR of minus 17.0% to $2.1bn, with margins contracting from 22.2% to 8.1%.

Over FY 21-24, FCF rose from $3.1bn to $3.6bn. Cash and cash equivalent rose from $2.5bn to $3.8bn. In addition, its gearing improved from 9.8% to 4.0%.

In comparison, Micron Technology, Inc., a local peer, posted a revenue CAGR of 6.7%, reaching USD 37.8bn over FY 22-25. EBIT rose at a CAGR of 0.3% to $9.8bn. However, its margin contracted from 31.6% to 26.2%.

Positive outlook

Over the past year, the company's stock delivered strong returns of 53.3% over the past year. In comparison, Micron Technology delivered higher returns of 134.5%.

AMD is currently trading at P/E of 85.9x, based on the FY 25 estimated EPS of $2.5, which is lower than its 3-year historical average of 160.2x but higher than Micron Technology (14.8x). The company is currently trading at an EV/EBIT of 47.4x, based on the FY 25 estimated EBIT of $7.3bn, which is lower than its 3-year historical average of 32.2x but higher than Micron Technology (11.2x).

The stock is largely liked by analysts who cover it, with 40 having 'Buy' ratings and 11 having 'Hold' ratings for a target price of $283.6, reflecting 30.3% upside potential over its current market price.

Analysts' views are supported by an estimated EBIT is expected to rise at a CAGR of 46.5% to USD 19.3bn over FY 24-27, with margins expanding from 23.8% to 31.4% in FY 27. In addition, analysts estimate a net profit CAGR of 96.2% to $12.4bn. In comparison, for Micron Technology, analysts estimate an EBIT CAGR of 36.8% and a net profit CAGR of 28.7% over FY 25-28.

Overall, AMD's strong growth prospects, innovative partnerships, and positive analyst sentiment position it well for future success. Despite current margin pressures, its strategic initiatives and expanding AI infrastructure in Saudi Arabia highlight its potential to capitalize on emerging opportunities and deliver substantial long-term value to shareholders. However, it faces risks including intense competition, AI adoption challenges, supply chain disruptions, margin pressures, operational threats, regulatory issues and financial market uncertainties.