Advanced Micro Devices, Inc. (NASDAQ:AMD) is poised to benefit from the next phase of the AI infrastructure boom. This comes as chip demand expands beyond graphics processing units (GPUs) into central processing units (CPUs) and other data center products.
According to a Reuters report on July 23, AMD and Intel Corp (NASDAQ:INTC) are negotiating longer-term purchase commitments with Chinese server customers. These talks are happening amid tightening supply and rising prices, and so they highlight how AI-driven demand and US-China tech rivalry are reshaping chip supply deals.
Long-Term Supply Agreements Reflect Growing CPU Demand
For some time, server CPUs have been easier to obtain than GPU and memory chips. But now things are changing quickly in favor of CPU suppliers, as AI infrastructure buildout broadens to support increasing workloads.
At the same time, geopolitical tensions continue to reshape global semiconductor supply chains. For instance, Chinese companies face restrictions on access to the most advanced AI chips.
The concern among Chinese tech companies expanding into AI services is that CPU shortages could raise infrastructure costs and slow deployment. Prices for some server CPUs in China have gone up more than 40% since the beginning of the year amid tightening supply. Moreover, month-over-month price increases have exceeded 10% for certain products. This situation is encouraging CPU buyers in China to lock in supply through longer-term purchase commitments.
What the Long-Term CPU Deals Mean for AMD
Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel are discussing purchase commitments that generally cover one year of supply. They have also discussed agreements extending two years or longer. The contracts being discussed center on locking purchase volumes while allowing prices to remain flexible.
The negotiations with Chinese customers support AMD management’s view that AI-driven chip demand is spreading across the broader semiconductor ecosystem, though the talks aren’t publicly confirmed. AMD now expects the global server CPU market to grow and exceed $220 billion by 2030, driven partly by rising demand from agentic AI workloads. That is almost double its previous growth estimate of 18% annually. AMD sees growing demand driven by agentic AI workloads fueling the accelerated market growth.
Valuation Multiples Still Favor AMD Relative to Intel
Advanced Micro Devices, Inc. (NASDAQ:AMD) trades at a lower forward earnings multiple than Intel, although both stocks carry elevated valuations. It trades at a forward price-to-earnings (forward PE) ratio of 66.23x, compared with a forward PE of roughly 70x for Intel.
Investors see AMD as having a stronger position in the server CPU market, and that the growing AI opportunity could support sustained earnings growth if management continues executing successfully.
Hedge Fund Sentiment Continues to Favor AMD
AMD is a huge favorite of hedge fund holders among semiconductor companies. Insider Monkey’s database as of Q1 2026 shows that some 134 hedge funds held positions in AMD, up from 132 hedge funds in the stock in the previous quarter. Intel also attracted hedge fund interest, as hedge fund holders increased to 112 from 96 from the previous quarter.
D. E. Shaw remains the most significant hedge fund holder in Advanced Micro Devices, with 3,853,311 shares worth $783.9 million as of the latest quarter, though the firm trimmed its position by 46%. Marshall Wace LLP, led by Paul Marshall and Ian Wace, reported 3,791,986 shares valued at $771.4 million, after reducing its stake by 21%. In contrast, Polar Capital, managed by Brian Ashford‑Russell and Tim Woolley, boosted its AMD holdings by 24%, while ARK Investment Management, under Catherine D. Wood, increased its stake by 6%. This divergence in hedge fund activity underscores the mixed sentiment around AMD.
Market sentiment is balanced for AMD and Intel. At the end of June, AMD’s short interest stood at 41.58 million shares, or around 2.56% of its public float. In the same period, Intel’s short interest stood at 127.79 million shares, or 2.54% of the public float.
While both stocks have low bearish positioning, AMD boasts stronger hedge fund confidence in its long-term AI opportunity.
Investor Takeaway
AMD’s bullish case rests on the company benefiting as AI infrastructure spending expands beyond GPUs into CPU and other chip types. The company’s reported long-term supply discussions with Chinese customers signal strengthening demand for server CPUs and offer greater visibility into future sales.
On the other hand, bears would see the US-China tech rivalry, which has already led to some chip export restrictions, as a major headwind to AMD’s ability to make the most of the China demand. In addition, prolonged supply constraints could delay shipments even as demand remains strong. AMD also faces intense competition from Intel and other chipmakers pursuing AI infrastructure opportunities.
While we acknowledge the risk and potential of AMD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMD and that has 10,000% upside potential, check out our report about this cheapest AI stock.
READ NEXT: Can American Airlines (AAL) Close the Profitability Gap With Delta and United? and Why TotalEnergies (TTE) Could Be a Strong Energy Stock to Buy.
Disclosure: None. Follow Insider Monkey on Google News.
Hedge Fund Resource Center