Advanced Micro Devices, Inc. (NASDAQ:AMD) is trading at roughly 70x forward earnings, but Phillip Securities believes this premium is justified given its positioning for rising agentic AI demand.
On August 11, the firm’s analyst Yik Ban Chong reiterated a Buy rating on the stock with a $755.00 price target. According to the firm, AMD’s client and gaming business faces softer demand due to higher memory costs, but rising MI450 and Venice demand support the longer-term buy thesis.
Raising FY27 AI Expectations
Despite an expected cyclical downturn in the client and gaming business, Phillip Securities has raised its FY27e revenue and PATMI assumptions by 4% each. This is supported by increasing visibility across Helios, MI450GPU, and Venice server CPU demand.
A major part of the bull thesis rests on Anthropic. On July 22nd, the company announced that it will be partnering with AMD to deploy up to 2 gigawatts of AMD Instinct MI450 Series GPUs in AMD Helios rack-scale solutions, with deployment of the first gigawatt to begin in the first half of 2027. As per the firm’s estimates, this could bring in an additional US $30 billion in revenue, equivalent to 87% of FY25 revenue.
Not only this, Wedbush has recently highlighted that AMD’s Anthropic partnership could translate into substantial real-world AI infrastructure demand. The firm noted how Anthropic’s reported 191-megawatt data center agreement with Riot Platforms (NASDAQ:RIOT) offers a sign of durable AI spending, potentially benefitting AMD as it prepares to supply Anthropic with its next-generation AI accelerators.
Trading at roughly 69.9x FY26e P/E, the premium valuation is a reflection of AMD’s improving position in the next phase of AI infrastructure spending.
Premium Still Creates Execution Risk
The bear case for AMD is that its expected AI expansion is already reflected in its valuation. Sitting well above the tech sector average, its valuation signifies aggressive future growth expectations for AI and data center chips.
Estimates from Phillip Securities also highlights some of the near-term pressure. In particular, the firm lowered its FY26e PATMI forecast by 8% due to softer demand in client and gaming. This is a sign that strength seen in artificial intelligence for AMD doesn’t insulate it from weakness in other parts of its portfolio.
More importantly, the bullish thesis for AMD rests on strength across Helios, MI450GPU, and Venice server CPU demand. If this demand weakens, AMD’s premium valuation may be harder to defend.
Hedge Fund Interest Remains Strong
Institutional investors remain heavily exposed to AMD stock. According to Insider Monkey’s database, 134 hedge funds held AMD at the end of the first quarter of 2026, up from 132 in the prior quarter.
Meanwhile, short interest also points to limited bearish positioning. As of July 31, AMD held a short interest of 37.75 million shares, representing about 2.32% of its public float. Both hedge fund data and short interest imply how investors aren’t broadly betting against AMD’s premium valuation.
Overall, AMD’s premium valuation leaves little room for execution setbacks, but improving visibility across its Helios, MI450GPU, and Venice server CPU demand supports Phillip’s view that AI growth could justify the multiple.
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: SpaceX (SPCX) and Northrop Grumman (NOC) Clear Golden Dome Test: Who Has More to Gain? and Nvidia (NVDA) Is Going Beyond GPUs in the $500 Billion AI Boom, Wells Fargo Says
Disclosure: None. Follow Insider Monkey on Google News.
Hedge Fund Resource Center