If You Are an AMD Shareholder...You Need to See This!

AMD just became a trillion dollar company. And on today's episode, Neo and I are going to discuss what the market is pricing in. More importantly, what are some of the things that investors should keep a closer eye on as this is a stock that has seen a massive explosion in valuation. Let's take a closer look in today's episode. Welcome back, fools. We're going to discuss advanced micro devices, also known as AMD. AMD is now worth over $8 trillion. Year to date, it's up $178.4%. It's been an amazing ride for AMD, the company, but especially for AMD shareholders. Now, what is the reason that AMD is worth a trillion dollars today? Is it purely a data center story? Is it purely because oh if Nvidia is worth over $5 trillion maybe the number two AMD should be worth a trillion dollars. So we're we're going to discuss the positive things that have pushed AMD towards a trillion dollar valuation and then we'll talk about what investors should keep an eye on because yes it's amazing to see that this company has grown so much in such a short period of time but of course it also has to deliver. So alo, what do you think is the main reason? Let's start with the main reason why we're seeing AMD at a trillion dollars right now. >> Yeah. So, so we're probably going to talk about two main points, Neil, but I think the one really pushing right now, um, as we see from kind of the chart you had posted ear you had shown earlier was there was this massive um, in the past few weeks there's been this massive explosion on Meta Platforms AI tool called Muse, their AI agent. And one thing that has been discussed in numerous um numerous quarters by AMD and by various experts is that AI agents are uh are products that end up using a lot of tools in on your computer, virtual machines or on the cloud. Wherever it is, these tools that it is using um are mainly CPU based. So, we're I'm not sure if if any of the fools here have been on X, but on X, there's been a few stories that Muse and Meta's AI agent has. I I seen one example I saw was there was a person and I'm not sure if it's real or not, but it does showcase the actual workflow that happens. Uh there was a person who their flight was delayed and Muse uh the example they showed is they told Muse, "Hey, can you help me out here?" and Muse end up going to email, finding the email of the of the travel of the airline, um, telling them about the issues and whatnot, getting all the information, and the user ended up getting a $250 credit or some form of of of compensation for the delay. Now within there right the platform itself or this AI agent had to use various software solutions had to open up various uh websites and all that takes CPU um CPU computation from a CPU and now if you start to think agents everybody using some form of AI agents over and over again multiple agents at the same time the demand for CPU is going to grow dramatically. Uh AMD has also been a prime example of how big this market got. I I remember November of 2025th, 2025, which is crazy that it's almost over a year ago, they talked about their for their investor analyst day, they mentioned the CPU market was going to be $60 billion. I think 3 months later when they reported their quarter 1 earnings they actually said you know what it's actually a lot larger than that because agentic tooling and one of the big things that happened between their AI investor event and their quarter 1 earnings was open claw came out. Uh openclaw was one of the first true agentic tool out there and when that happened AMD said you know what that 60 billion total addressable market that we gave you we actually are going to double it. We believe it's going to be $120 billion. And then fast forward another few months, right? We ended up in quarter 2 earnings and I believe Lisa Sue went up again and said, "You know what? That 120 billion total addressable market that we gave you, um, we actually expect it to be much larger than that. We're bumping it up to 220 billion instead." And that was before this MU. So, so I wonder if this first excitement is we already knew the AI CPU market was growing dramatically. Now, you're telling me that everybody has the opportunity to go out there and use Muse um and and it's a platform from it's coming from Meta Platform. It's a company that has great distribution of an AI agent. So if it was $220 billion market before a lot of people had the opportunity to do this, I I think the market is pricing is like what is actually going to be this upcoming earnings when Lisa Sue gives us any forms of revenue projections or a new total addressable market for the CPU space. Because if this is the worst AI agent we're going to get, this is going to be the worst AI agent we're going to get, right, Neil? Uh it's only going to get uh better from this. um and we're going to most likely end up using it for a lot more tasks. So I think if there was one reason AMD is running right now is the market is really enjoying the CPU space right now. You're seeing a lot of peers in the CPU market from Intel, from ARM, from Qualcomm kind of see similar uplift. So I think the CPU story is the story right now. But maybe we can talk about some of the risk there later on. Neo, any thoughts there on that first case and then maybe I want to push it on to you. Um, Neo, if you thought there the second reason why you think the market is really liking AMD uh this past year. >> Yes. So, more recently, it's definitely more a a CPU story. Although, we have seen over the past, I think, two quarters or so, Intel and AMD post quite good numbers when it came to CPU, server, CPUs, and things like that. And right now I mean they've been hinting towards a 1:1 ratio for the future GPU to CPUs right and if we are heading in that direction we know how big the GPU market is today. So can you imagine if if the CPU market is going to experience the same exponential growth AMD is very well positioned in the CPU space. Intel is very well positioned as well in the CPU space. I think Intel with Intel Foundry. I think we can still have some surprises there. Don't forget we also have Nvidia that's entering the CPU market. Maybe we'll talk about that in a bit. But as we can see right now on the screen, currently the market is already expecting AMD's revenue growth to start to accelerate. We're expecting fiscal year 26, 46.8% growth and then a solid acceleration in growth, 73.1% to reach over 88 billion in revenue in fiscal 27. that is because of the MI400 series. Uh there are Helios that's expected to really push this business to be way more competitive and be bigger competitors to Nvidia. And then as of right now the fiscal 28 projections not just with AMD but for many other companies. I think analysts are still not 100% certain what's going to happen in fiscal 28. So right now we are seeing a big deceleration in growth but it's still expected to grow 37.7% to reach over $121 billion. So the thing with AMD is yes the stock has risen quite a lot but the real growth story is just about to happen. So when we talk about a stock being priced to perfection or a lot of the future story is baked in, you could start to see this being an example. I'm not saying it's exactly that, but it does resemble an example where the market is looking further out into the future and saying, "Okay, AMD, we now see them being very, very big competitors to Nvidia. Nvidia is worth over $5 trillion. AMD at the start of the year was not worth a trillion dollars was worth way less but we are seeing the growth starting to appear time and time again. AMD themselves right in their investor day at the end of 2025 they set their 3 to five year earnings per share target was exceeding or they expected to exceed $20 per share. Now 3 to 5 years starting at the end of 2025. It could be 2028, could be 2030. So when you're looking at maybe forward pricing multiples forward price to earnings ratios in this case you look at the $20 or exceeding $20 and we know the track record of Lisa and AMD is if they're saying exceeding $20 you can be sure that $20 is the floor here. So if you want to use a a double forward PE then yes you're at around 30 times. But currently it seems like if we are looking at the just traditional forward multiple for earnings, we're looking at something closer to 56.2 times. And I think that's where investors right now should maybe start to I would say temper expectations, but be realistic. >> Yeah. Yeah. I I I agree, Neil. And first I I'm a firm believer AMD was going to hit those $20 and at least $20 of earnings per share by 2028. Like you mentioned, Lisa Sue is a little bit more conservative. So if she tells me 3 to 5 years, I'm going to expect it closer to three years and she gave us that in 2025. So push it to 2028. Now um yes, next 20 24 months I would say forward PE ratio it's closer to that 30 like you mentioned Neil. Um but the funny part about that is that number was given to us when the CPU TAM was 60 billion and like you mentioned Neo right Lisa Sue already told us exceeding that number is is is now with the recent numbers and I think that's what the market is excited for right now it's like Lisa Sue already told us is exceeding now with this what is that actual number are we going to get to that 20 earnings per share a lot faster and that's where expectations need to the um the results and I'm a long-term investor of AMD and I'm sure you are too, Neo. I I know you cover you've owned this one for a while too as well. Um to me, it's like the CPU story is great, but I'm not going to go expecting this upcoming earnings for us to see a massive beep um just because of this new MU story. The main reason is we we kind of talked a little bit before uh before started recording is to build a supply chain takes time. It's not like hey we have this massive demand of of of CPU let's start selling them tomorrow. Uh Lisa Sue has already mentioned that look supply chain has been tight. Um we saw Intel even had the opportunity to sell older CPUs that they thought were worthless. Uh I'm not I'm not sure if it was this quarter or last quarter they mentioned that. Um but it shows you where we're at in the space and to build supply takes time. And right now in a market where you're not only fighting for supply on CPU, you're also fighting supply on all these GPUs that are being built on all these memories, all these other types of chips. TSMC and all these foundaries are working on overdrive. The ability to build supply in such a short amount of time is not impossible, but it's something investors should consider by saying, "Look, I'm buying AMD right now because I expect MUS is going to give us great results in the CPU space in three months." Um, it's not impossible, but I don't think it's going to be something dramatic because it takes time to build these products. Um, and and and kind of going back there to to the AMD Helios, I think that's the one I'm super excited to about, Neil. We we know the end of this quarter. I think they mentioned at the end of September um is when a lot of the shipments is going to start going on for the MI450. We started them seeing getting a lot of contracts with they had contracts with um Anthropic uh with OpenAI, with Meta Platforms, with some of the other big players as well. Uh but those three names alone are are are ones that are going to be buying a nice amount of GPUs for them. Um, and I'm pretty excited to see what kind of language and commentary Lisa Sue tells us about the market and where we're heading, but I am still under the impression that I'm not expecting a massive massive beat this quarter. What about you, Neil? Yes. So, if we look at at what the analysts are projecting, and you're right, for the upcoming quarter, you can see growth deceleration, but then again, they might beat it. But right now, analysts are expecting the upcoming quarter to represent around 40.5% revenue growth year-over-year. And then the quarter afterwards and onwards, you see a solid acceleration. Why? Because of Helios. Because that's when that will ramp up and they'll start to collect a hell of a lot more revenue. But yeah, to answer the question, maybe they might surprise the market. Maybe ASPs have gone up. We do know that they have told that they're that they're expected to increase prices because of the memory price increase that everybody has been uh has been seeing. Although I don't think that will impact the upcoming quarter at all. But if the market currently is expecting AMD to grow 40.5% again for the price that you're paying, I would expect them to beat the market expectations. I would expect them to beat it. Maybe not by a lot actually. Maybe we can go and have a look at what they did over the last couple of quarters. So last quarter they beat expectations by just 2% the quarter before by 3.4%. So maybe they can maybe they can beat it again by 2 3% or so then the question will be is it going to be enough and are they going to raise guidance? I think if they're able to unlock some supplies, I think that would be great. Or like you mentioned, Neil, if they are able to increase average selling prices on some of these CPUs, that can be both a revenue and a margin um improvement. Um we will have to see how Lisa Sue is going to play this out. Um especially if demand is going crazy like we're seeing right now. Uh the other kind of little risk I would say investors should consider and and just because we're talking risk about the company doesn't mean it's bearish. It's just great to understand both sides. This is going to be uh the first time AMD with the Helios rack is going to come out with a full rack scale system. A full rack scale system is very cool. It's a very difficult product to do. We saw when Nvidia first did it, there were rumors of delays of certain issues um which caused the stock to be very volatile during those times. I would say for AMD be prepare of certain type of news and stuff like that floating around that hey there might be a delay there might be a hiccup with this um and and not necessarily a delay because Lisa Sue has mentioned it but like a a delay in installation because maybe something came up wrong not a delay of shipment but a delay of installation which is a bit different um so be prepared for that I think most investors are um should just be understand that that's a risk I personally would see any of that not necessarily as a thesis breaking more of just more volatility being added to the market. >> Yeah. And plus I mean they they do have the advantage of not being first to market with such a solution. So they can look at what happened with Nvidia and make sure that it doesn't happen with them so they can move faster. Another thing I want to mention is because the stock price is above $600. We've seen that they had strategic partnerships, right, with Meta, with OpenAI, and both of them, I think Meta gets $160 million shares or so if the stock is above $600, but it's not the only thing that matters. Yes, the stock is now above $600, but that doesn't mean that Meta gets to buy 160 million shares at I think a cent or so, which yes creates dilution, but still they also need to deploy what is it up to 6 gawatt worth of of compute. So 6 gawatt translated in revenue is tens of billions of dollars pro probably more, right? Probably way more in in AMD in AMD revenue. So yes, right now you're probably going to see a lot of headlines saying, "Oh, maybe maybe Meta gets to get 8 9% of AMD." But no, they will only get it when a couple of milestones get reached. I think couple of gigawatts the the the full package is yes over $600 per share, but also 6 gawatt of compute deployed. And as of right now, we are far far from that 6 gawatt. And of course, there is the OpenAI side of things as well. Yeah, Neil, one final question before we end out this episode. Do you think now that the stock is at 600? Do you think this forces this has meta thinking actually, you know, maybe we should buy as much compute as we can because we'll be able to get that share, be able to get some of these stuff at a at a discount per se, now that we know that trench is hit and we'll be able to get a nice amount of equity at the moment. Any any thoughts there or do you think they go to maybe whatever they normally had as planned? I mean I I don't think AMD has six gawatts worth of of compute to give Meta today, right? So even if Meta were were to come to to Lisa Sue and say, "Look, >> do you have 6 GW worth of of GPUs right now?" I I think they would say no. Cuz if they did, I think the revenue projections would have been significantly higher than where they're at uh at right now. So they'll have to wait. >> Yeah. Yeah. But I guess it's not to buy the hope, but do you think it forces them to maybe accelerate a little bit? Maybe they said they were going to buy maybe a few hundred megawws this quarter, a few hundred megawws next quarter. Do you think that improves a little bit just because they're like, "Oh, look, we're actually at that price point. Let's try to hit the 6 gawatt. Maybe back then we thought in 5 years, maybe let's try to hit it in three years instead or in two years." Do you think there's any incentive here or or or or no nothing? I mean they could hit the the earlier trenches much faster right the one gawatt 2 gawatt trenches I think they could hit those faster and look muse is taking is taking over it seems I think right now it's seeing more success than the early days of chat GPT which is which is incredible because muse is only available now in the US and Canada and and soon India so I think it's also in meta's advantage to to deploy as much compute as possible in order to yes make sure that Muse is available worldwide because yes it's they can say oh we're now available globally but if you don't have enough compute to serve everyone then the experience using Muse is going to get worse and worse I don't think you want that so I think it's in their advantage as well we know that next year Meta is also coming out with their own custom chips that they're working with with Broadcom but they've also been working closely with AMD so I think it's it's in both of these companies advantage to to move as fast as possible. >> Definitely. Thank you for that, Neo and Fulis. Let us know in the comments below. What are your thoughts on AMD right now with the stock sitting over $600 over a trillion dollar market cap? What are some of the fears you might have at the moment? And do you think those fears are more short-term fears or long-term fears? Let us know in the comments below. Take care, have a good day, and see you all next time.