Will Strong Data Center Growth Push Up AMD's Stock Higher in 2026?

Advanced Micro Devices AMD shares have jumped 70.3% in the past year, outperforming the Zacks Computer and Technology sector’s 24.7% return and the Zacks Computer – Integrated Systems industry’s appreciation of 68.8%. AMD’s outperformance can be attributed to strong demand for EPYC processors as well as Instinct MI350 series and MI300 series GPUs. AMD expects Data Center revenues to grow double-digit both on a year-over-year and sequential basis in the fourth quarter of 2025, driven by a strong portfolio. 

AMD envisions the data center total addressable market to hit $1 trillion by 2030, suggesting a CAGR of more than 40% from roughly $200 billion estimated in 2025. AMD expects its data center AI revenues to see a CAGR of more than 80% over the next 3-5 years, driven by strong demand for instinct GPUs (MI450 Series and Helios rack-scale solutions) and expanding clientele that includes multiple hyperscalers as well as sovereign opportunities. Overall data center business revenues and total revenues are expected to see a CAGR of more than 60% and greater than 35%, respectively, over the same time frame. 

Will the strong Data Center growth continue to push the AMD stock higher in 2026? Let’s dig deep to find out.

EPYC and Instinct Adoption Bode Well for AMD’s Prospects

AMD’s Data Center prospects ride on strong demand for fifth-gen EPYC processors. Hyperscalers launched more than 160 EPYC-powered instances in the third quarter of 2025, including new Turin offerings from Google, Microsoft Azure, Alibaba and others. More than 1,350 public EPYC cloud instances are now available globally, up roughly 50% year over year.

Oracle’s launch of MI355X instances, which deliver high performance for real-time inference and multimodal training workloads on Oracle Cloud Infrastructure’s (OCI) zettascale supercluster, is expected to drive growth. OCI will launch the first publicly available AI supercluster using AMD’s Helios rack design, featuring Instinct MI450 GPUs, EPYC Venice CPUs and Pensando Vulcano networking.

The MI350 series has gained traction among neocloud providers, including Crusoe, DigitalOcean, TensorWave and Vultr, among others. The MI300 series is gaining rapid adoption among developers. IBM and Zyphra, as well as Cohere, are now using the MI300X GPU series. Zyphra’s ZAYA1 recently became the first large-scale Mixture-of-Experts model trained entirely on AMD’s Instinct MI300X GPUs, Pensando networking and ROCm open software. New partners like Character.AI and Luma AI are now running production workloads on the MI300 Series. OpenAI selected AMD as a preferred partner to build 6 gigawatts (GW) of next-generation AI computing capacity. The rollout will begin with 1 GW of AMD Instinct MI450 GPUs in the second half of 2026.

AMD Offers Positive Q4 Guidance

AMD expects fourth-quarter 2025 revenues of $9.6 billion (+/-$300 million). At the mid-point of the revenue range, this represents year-over-year growth of approximately 25% and sequential growth of approximately 4%.
 

Advanced Micro Devices, Inc. Price and Consensus

Advanced Micro Devices, Inc. price-consensus-chart | Advanced Micro Devices, Inc. Quote

The Zacks Consensus Estimate for fourth-quarter 2025 revenues is pegged at $9.64 billion, indicating 25.9% from the figure reported in the year-ago quarter. The consensus mark for fourth-quarter 2025 earnings is pegged at $1.31 per share, unchanged over the past 30 days, suggesting 20.2% from the figure reported in the year-ago quarter.

AMD Faces Stiff Competition in Data Center

AMD is facing stiff competition from the likes of NVIDIA NVDA, Broadcom AVGO and Intel INTC. NVIDIA is benefiting from the strong growth of AI and high-performance, accelerated computing. The company’s newer Hopper 200 and Blackwell GPU platforms are being rapidly adopted as customers work to grow their AI infrastructure. 

Broadcom is benefiting from strong demand for its networking products and custom AI accelerators (XPUs). AVGO expects accelerated demand for XPUs in the back half of 2026 as hyperscalers focus more on inference, along with frontier model training. Intel is undertaking various strategic decisions to gain a firmer footing in the expansive AI sector. Capital infusion by Softbank, NVIDIA and direct funding from the U.S. Department of Commerce are likely to pave the way for innovation and growth.

Over the trailing 12 months, AMD shares have underperformed Broadcom and Intel while outperforming NVIDIA. Shares of AVGO, Intel and NVIDIA have returned 121.7%, 101.3% and 32.5%, respectively, over the same time frame.

AMD Stock’s One-Year Performance

AMD’s Stretched Valuation is a Concern

AMD stock is currently overvalued, as the Value Score of F suggests a stretched valuation at this moment.

The stock is trading at a premium, with a forward 12-month price/sales of 8.49X compared with the sector’s 6.79X.

AMD Valuation

Conclusion

AMD’s expanding portfolio and growing data center AI footprint are expected to improve its top-line growth. However, its near-term prospects are dull due to stiff competition from NVIDIA in the cloud data center and AI chip markets. Stretched valuation is a concern. These factors are expected to remain an overhang on the stock.

AMD currently has a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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