Wait For A Dip To Buy Advanced Micro Devices Stock
Advanced Micro Devices (NASDAQ:AMD) stock looks relatively expensive – making it an expensive pick to buy at its current price of around $93. We believe there are some minor concerns with AMD stock, which makes it relatively expensive, given that its current valuation looks high.
The generative AI wave has driven strong demand for GPUs, but AMD’s AI accelerator business has underperformed expectations. Over Q4, AMD’s data center revenue, seen as a proxy for its AI chip sales, came in at $3.9 billion, falling below consensus estimates. The outlook was also weak, with the company indicating that data center sales for the current quarter are likely to fall 7% sequentially. President Donald Trump’s trade war could also hurt companies like AMD. While there has been little clarity on the exact extent of tariffs on semiconductors, given the inconsistent messaging from the White House, this nevertheless presents a risk for AMD, given that it imports most of its chips from Taiwan and other Asian countries. AMD also has a lower cushion to absorb tariffs, unlike rivals such as Nvidia, given its lower gross margins.
Now, our analysis of Advanced Micro Devices along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operating performance and financial condition, as detailed below, although its valuation is rich. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Advanced Micro Devices’ Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, AMD stock looks very expensive compared to the broader market.
• Advanced Micro Devices has a price-to-sales (P/S) ratio of 5.6 vs. a figure of 2.8 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 69.0 compared to 21.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 87.7 vs. the benchmark’s 21.3
How Have Advanced Micro Devices’ Revenues Grown Over Recent Years?
Advanced Micro Devices’ Revenues have grown considerably over recent years.
• Advanced Micro Devices has seen its top line grow at an average rate of 17.8% over the last 3 years (vs. increase of 6.2% for S&P 500)
• Its revenues have grown 13.7% from $23 Bil to $26 Bil in the last 12 months (vs. growth of 5.3% for S&P 500)
• Also, its quarterly revenues grew 24.2% to $7.7 Bil in the most recent quarter from $6.2 Bil a year ago (vs. 4.9% improvement for S&P 500)
How Profitable Is Advanced Micro Devices?
Advanced Micro Devices’ profit margins are worse than most companies in the Trefis coverage universe.
• Advanced Micro Devices’ Operating Income over the last four quarters was $2.1 Bil, which represents a poor Operating Margin of 8.1% (vs. 13.1% for S&P 500)
• Advanced Micro Devices’ Operating Cash Flow (OCF) over this period was $3.0 Bil, pointing to a moderate OCF-to-Sales Ratio of 11.8% (vs. 15.7% for S&P 500)
Does Advanced Micro Devices Look Financially Stable?
Advanced Micro Devices’ balance sheet looks strong.
• Advanced Micro Devices’ Debt figure was $2.2 Bil at the end of the most recent quarter, while its market capitalization is $152 Bil (as of 4/11/2025). This implies a very strong Debt-to-Equity Ratio of 1.5% (vs. 21.5% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $5.1 Bil of the $69 Bil in Total Assets for Advanced Micro Devices. This yields a moderate Cash-to-Assets Ratio of 7.4% (vs. 15.0% for S&P 500)
How Resilient Is AMD Stock During A Downturn?
AMD stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on AMD stock? Our dashboard How Low Can Advanced Micro Devices Stock Go In A Market Crash? has a detailed analysis of how the stock performed during and after previous market crashes.
Inflation Shock (2022)
• AMD stock fell 65.4% from a high of $161.91 on 29 November 2021 to $55.94 on 14 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 18 January 2024
• Since then, the stock has increased to a high of $211.38 on 7 March 2024 and currently trades at around $93
Covid Pandemic (2020)
• AMD stock fell 34.3% from a high of $58.90 on 19 February 2020 to $38.71 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 22 July 2020
Global Financial Crisis (2008)
• AMD stock fell 91.2% from a high of $20.35 on 1 January 2007 to $1.80 on 25 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 21 August 2018
Putting All The Pieces Together: What It Means For AMD Stock
In summary, Advanced Micro Devices’ performance across the parameters detailed above are as follows:
• Growth: Extremely Strong
• Profitability: Weak
• Financial Stability: Very Strong
• Downturn Resilience: Very Weak
• Overall: Neutral
But given its extremely high valuation, the stock appears relatively expensive, which supports our conclusion that AMD is a expensive stock to buy.
The rich valuation of AMD stock limits its upside potential in the near-to-mid term. As an alternative, the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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