Is Advanced Micro Devices (AMD) Still a Buy After Its 180% Plus Rally?

The rapid expansion of artificial intelligence is creating a major opportunity in the central processing unit (CPU) market, positioning Advanced Micro Devices, Inc. (NASDAQ:AMD) for robust growth.

Bank of America strategists expect the server market to expand from approximately $61 billion to $211 billion by 2030. The firm estimates that roughly $180 billion of the $211 billion server CPU market in 2030 will be tied to AI workloads, creating a significant market for AMD’s EPYC server processors.

AMD also ranks among Insider Monkey’s 11 AI Stocks That Will Go to the Moon— but where does it rank among the other AI names on the list?

On September 25, the research firm reiterated a Buy rating on AMD. It raised its price target to $720 from $620, citing the company’s opportunity to capture a larger share of the rapidly expanding CPU market.

AMD’s rally has already pushed expectations sharply higher, raising a tougher question: what does a $1 trillion valuation now demand from AMD’s AI ambitions?

Agentic AI Could Boost Demand for AMD CPUs

BofA’s higher price target comes as the firm expects agentic AI to increase demand for CPUs that coordinate workloads, manage data, and support increasingly complex AI systems.

Rather than replacing GPUs, CPUs are increasingly complementing them within AI infrastructure. This trend is already supporting AMD’s CPU business.

The price target hike comes as BofA expects agentic AI to fuel demand for CPUs to coordinate workloads and manage data. CPUs increasingly complementing GPUs rather than competing with them drove growth in AMD CPU revenue in Q2.  Client business revenue was up 23% year over year to $3.1 billion, driven by strong demand for Ryzen processors.

Additionally, Advanced Micro Devices, Inc. is well positioned to gain from AI infrastructure beyond GPUs.  The company offers a wide range of platforms that combine EPYC CPUs with Instinct GPUs and networking technologies. That was one reason the company’s data center revenue rose 107% in the second quarter to $6.72 billion, driven by growth in EPYC server CPUs and Instinct GPUs.

AMD’s AI Opportunity Extends Beyond GPUs

BofA’s bullish view does not depend on Advanced Micro Devices, Inc. replacing Nvidia as the dominant provider of AI accelerators. Instead, the firm sees AMD as a potential beneficiary of the broader evolution of AI computing architecture.

As AI workloads become more complex and increasingly autonomous, data centers require CPUs, GPUs, networking, and other components to work together efficiently. This creates an opportunity for AMD to benefit from the overall expansion in AI infrastructure, even if GPUs remain the primary engines for many AI workloads.

The opportunity surrounding CPUs could become particularly important as agentic AI applications require greater coordination between different computing resources.

Stock Faces Higher Expectations

Advanced Micro Devices, Inc.’s rapid expansion in AI has also raised expectations for the stock. The stock has gained more than 180% in 2026, reflecting investor optimism about the company’s ability to capture a larger portion of the AI infrastructure market.

The stock trades at a premium, with a forward price-to-earnings multiple of 39X, roughly two times Nvidia’s 19X. This means investors are paying considerably more for each dollar of AMD’s expected future earnings.

Nevertheless, robust growth from a smaller base justifies AMD’s valuation, as second-quarter revenue was up 50% while data center revenue more than doubled year over year.   On the other hand, Nvidia boasts of a profitability advantage, as its gross margins stand at about 75%  compared to AMD’s 54%.

Any signs that AI infrastructure spending is slowing, or that AMD is capturing less of the expected CPU opportunity, could pressure investor sentiment. A significant portion of expected growth is also tied to hyperscalers, AI labs, and data-center infrastructure providers. If these customers reduce or delay capital expenditures, the company could experience a meaningful slowdown in growth.

Hedge Fund Positioning

Institutional investors have also been increasing their exposure to AMD amid the AI boom. As of the second quarter, 164 hedge funds held positions in AMD, up from 134 in the first quarter, indicating increased institutional participation.

Among individual investors, Marshall Wace LLP increased its AMD position by 3% to approximately $2.26 billion, while DE Shaw reduced its exposure by 21% to approximately $1.79 billion.

Short interest, meanwhile, remained relatively modest. AMD had approximately 39.98 million shares sold short as of September 15, down from 41.71 million shares on August 31. That represented approximately 2.46% of the float. That represented short interest of approximately 2.45%.

The Verdict

Advanced Micro Devices, Inc.’s investment story is increasingly tied to the broader AI computing ecosystem rather than GPUs alone. BofA’s $720 price target reflects the firm’s view that the rapid growth of AI workloads could create a substantial opportunity for AMD’s EPYC CPUs alongside its Instinct GPUs and networking products.

The key question for investors is whether the company can continue translating the enormous growth in AI infrastructure spending into sustained CPU and data-center revenue growth. With expectations already elevated following the stock’s substantial rally, execution, hyperscaler spending, and the pace of AI adoption will remain important factors for AMD shares.

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