Why AMD Stock Jumped Today

Shares of Advanced Micro Devices (NASDAQ: AMD) climbed 9% on Wednesday after the artificial intelligence (AI) chipmaker laid out a promising growth trajectory for investors at its Financial Analyst Day event.

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AMD has a long runway for expansion still ahead

The semiconductor designer forecasts revenue gains of more than 35% annually over the next three-to-five years, fueled by 60% annual growth in its data center business.

The company's forthcoming Helios systems, featuring ultra-high memory Instinct MI450 Series graphics processing units (GPUs), are designed to provide rack-scale performance to hyperscalers and other customers, starting in the third quarter of 2026.

AMD also plans to capture more than half of the server central processing unit (CPU) market, up from roughly 40% today, driven by strong sales of its highly efficient EPYC processors.

Better still, AMD expects its adjusted operating margin to rise to over 35%, up from about 24% today, as it scales its operations. In turn, management sees a path to more than $20 in earnings per share.

"AMD is entering a new era of growth fueled by our leadership technology roadmaps and accelerating AI momentum," CEO Lisa Su said.

Competition will be fierce

Rival Nvidia (NASDAQ: NVDA), of course, won't cede ground willingly. The $4.7 trillion semiconductor behemoth dominates the market for advanced AI chips.

However, Nvidia's customers want to diversify their chip suppliers, ease capacity shortages, and keep a lid on prices, so they're likely to support AMD's efforts. AMD thus has a realistic chance at capturing a significant piece of the booming AI chip market in the coming years.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.