While Nvidia (NASDAQ:NVDA) dominates the headlines in artificial intelligence (AI) and GPUs, Advanced Micro Devices (NASDAQ:AMD) is quickly emerging as a top semiconductor stock to watch. In 2025, AMD has made major strategic moves, expanded partnerships, and delivered strong financial results, solidifying its position as a credible challenger in the AI-driven chip race.

AMD’s Explosive Growth in 2025

In Q1 2025, AMD reported revenue of $7.4 billion, up 36% year-over-year—outperforming expectations. The company’s Data Center segment alone delivered $3.7 billion, growing 57%, largely driven by adoption of AMD EPYC CPUs and Instinct GPUs. These chips are powering cloud services at Amazon Web Services (NASDAQ:AMZN), Google Cloud (NASDAQ:GOOGL), Oracle (NYSE:ORCL), Tencent (OTC:TCEHY), and Alibaba (NYSE:BABA).

AMD’s data center growth is bolstered by enterprise wins from major companies like CrowdStrike (NASDAQ:CRWD) and Siemens (OTC:SMNEY), proving EPYC’s wide appeal in AI infrastructure.

Strategic Shift: Focusing on Design, Not Manufacturing

In a bold strategic move, AMD recently announced it would sell ZT Systems’ data center infrastructure manufacturing unit to Sanmina Corporation (NASDAQ:SANM) for up to $3 billion. While this raised some analyst concerns, the core design teams are being retained, allowing AMD to focus squarely on what it does best—chip design and AI optimization.

CEO Lisa Su emphasized that the deal frees AMD to accelerate development of next-gen chips, including the 5th Gen EPYC and Venice CPUs, which will be manufactured using Taiwan Semiconductor’s (NYSE:TSM) advanced 2-nanometer node.

Other Business Segments Continue to Shine

Beyond data centers, AMD’s Client and Gaming segment pulled in $2.9 billion—up 28%—driven by demand for Ryzen 7000 and Pro CPUs. Though gaming revenue dipped 30% due to weaker semi-custom sales, the Radeon RX 9070 GPU launch was a hit, selling out faster than any previous Radeon product.

The Embedded segment saw a 3% decline, but AMD expects a rebound later this year as macroeconomic conditions improve and inventory levels normalize.

Strong Financials and a Shareholder-Friendly Approach

AMD exited Q1 with $7.3 billion in cash and only $4.1 billion in debt, maintaining a solid balance sheet. It also generated $727 million in free cash flow and returned $749 million to shareholders. The new $6 billion share buyback program, in addition to $4 billion previously authorized, underscores AMD’s shareholder-friendly strategy.

Despite facing $700 million in headwinds from U.S. export controls to China, AMD still expects Q2 revenue of $7.4 billion, up 27% year-over-year, and remains confident in achieving double-digit growth for the full year.

Analysts Remain Bullish on This Semiconductor Stock

Wall Street remains largely bullish on AMD. Out of 42 analysts, 28 rate it a “Strong Buy”. The average price target is $130, implying a 10% upside, while the high estimate of $200 suggests a potential 70% rally. Analysts at Bank of America, Wells Fargo, and TD Cowen all reiterated their buy ratings following the Q1 earnings beat.

However, not all analysts agree. Citi’s Christopher Danely remains cautious, concerned about the undervaluation of the Sanmina deal and the slowing AI growth sector. He maintains a neutral rating, highlighting short-term risks.

The Bottom Line: AMD is a Semiconductor Stock Worth Watching

While Nvidia continues to lead, AMD is quietly gaining ground as a semiconductor stock poised for long-term success. Its laser focus on AI chip innovation, strategic divestitures, and solid execution make it one of the most compelling tech investments of 2025.

For long-term investors seeking exposure to the AI revolution without paying Nvidia’s premium valuation, AMD represents a smart and undervalued play in the semiconductor space. If it continues to execute on its roadmap and expand its AI ecosystem, AMD could become a central player in the next wave of chip innovation.

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