After a rocky start to 2025, AMD stock (NASDAQ:AMD) is showing signs of recovery, catching the eye of investors looking for growth in the artificial intelligence (AI) and semiconductor sectors. Despite being down 27% year-to-date, strong first-quarter earnings and positive long-term prospects have reignited interest in Advanced Micro Devices.

Why AMD Stock Struggled Early in 2025

The underperformance of AMD stock so far this year largely stems from two factors: intense competition in the AI chip space and regulatory pressures. While NVIDIA (NASDAQ:NVDA) dominates AI chip sales, AMD has struggled to capture a significant market share. Additionally, the U.S. government’s export restrictions on AMD’s MI308X accelerators to China have shaved an estimated $1.5 billion off the company’s 2025 revenue expectations.

These factors contributed to negative sentiment, but recent financials suggest AMD may have been oversold.

Q1 Earnings Hint at a Turnaround

AMD delivered a standout performance in Q1 2025. The company reported revenue of $7.4 billion, a 36% year-over-year increase that exceeded Wall Street expectations. Gross margin expanded for the fifth consecutive quarter, and earnings per share beat estimates. These results reflect strong execution across multiple business units and mark four straight quarters of revenue acceleration.

Data Center and AI Businesses Drive Growth

A significant boost came from AMD’s data center division, which posted $3.7 billion in revenue, up 57% year-over-year. Much of this growth was driven by hyperscalers and enterprise clients adopting AMD’s 5th Gen EPYC processors.

Meanwhile, the company’s AI segment is gaining momentum. AMD saw double-digit growth in data center AI revenue, supported by growing adoption of its MI325X accelerators. The company has also begun sampling its next-generation MI350 series, with mass production expected mid-year. Additionally, the recent acquisition of ZT Systems strengthens AMD’s system design capabilities and accelerates its AI ambitions.

Consumer and Gaming Segments Show Mixed Results

AMD’s client computing segment, which includes consumer PCs, also performed well. Revenue soared 68% year-over-year thanks to strong sales of premium Ryzen processors. AMD recorded its fifth consecutive quarter of market share gains in the CPU market, reflecting increased adoption in both consumer and commercial channels.

The gaming segment was less favorable, with a 30% year-over-year decline. Lower sales of semi-custom chips for consoles offset rising demand for Radeon GPUs. Still, the launch of the Radeon 9070 series brought positive momentum, with initial demand exceeding expectations.

Outlook for AMD Stock in 2025

Despite the export ban on MI308X chips, AMD maintained its revenue guidance for Q2 2025 at $7.4 billion, representing 27% year-over-year growth. The company believes upcoming product launches—particularly in its AI and high-performance computing divisions—will offset the shortfall.

Looking ahead, AMD expects double-digit growth in 2025, fueled by demand for EPYC processors, Instinct accelerators, and Ryzen CPUs. The product roadmap also includes the MI400 series, which is expected to further boost AMD’s AI presence into 2026.

Is AMD Stock Cheap Enough to Buy?

Valuation is a key consideration. AMD stock currently trades at a forward P/E ratio of 30.8x, which may seem high, but not unreasonable given analysts project EPS growth of 27.5% in 2025 and nearly 48% in 2026. The PEG ratio—price to earnings growth—suggests that growth is reasonably priced, particularly when compared to peers like Nvidia.

Wall Street analysts maintain a “Moderate Buy” rating on AMD stock, with growing optimism surrounding its AI progress and earnings momentum.

Bottom Line

After a steep decline, AMD stock is showing meaningful signs of a comeback. With strong Q1 earnings, expanding AI adoption, and a compelling product roadmap, AMD looks well-positioned for long-term growth. For investors seeking exposure to AI and data center trends at a more attractive valuation than Nvidia, now may be a good time to consider buying AMD stock.

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