Hi YXI friends,

This is not a chart you’d see every day unless we are talking about meme tokens. But here we are, the relentless rise since the US-Iran Ceasefire has seen AMD more than double. This is a parabolic price regime unfazed by the earnings report that would normally “sell the news”.

Today, we will take a deeper dive into the latest earnings report, AMD’s price technicals, and whether today’s price ($465) is “fair”.

Housekeeping: All of the charts in this note were developed using proprietary analytical tools to provide a unique set of insights for YXI Premium subscribers.

You can find the past earnings of the companies we cover in the “Asset Profile” section of YX Insights below.

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

AMD designs and sells high-performance CPUs, GPUs, FPGAs, and adaptive SoCs across data-centre, client PC, gaming, and embedded end-markets.

Revenue is generated through the sale of semiconductor chips and related software/IP licences across four segments:

The unit of sale is a chip or module, with ASPs (average selling price) ranging from sub-$100 for embedded parts to $10,000+ for data-centre GPUs.

The business is currently shifting toward higher-ASP, higher-margin data-centre products, which have become the primary driver of both revenue growth and margin expansion.

AMD is fabless. It designs chips and outsources manufacturing primarily to TSMC, meaning the unit economics hinge on design IP leverage rather than fab utilisation. This also means AMD's cost of sales is driven by wafer purchases from TSMC and packaging/test costs. Gross margin is therefore a function of product mix and TSMC's pricing power.

The investment debate

Bulls are paying for AMD's ability to capture a meaningful share of the multi-hundred-billion-dollar AI accelerator market, behind NVIDIA’s pole position.

At the same time, bears worry that NVIDIA's CUDA ecosystem lock-in and competition from custom ASICs will cap AMD's data-centre GPU margin and market-share ceiling.

In Q1, AMD’s revenue rose by 38% to $10.3 billion, a slight acceleration from Q4, but by no means a massive leap or anywhere near NVDA’s growth.

Data Center is unambiguously the growth engine. Data Center revenue reached $5.78 billion in Q1 2026, up 57% YoY and 7% sequentially. It accounts for 56% of the company's total revenue.

The management has raised the Server CPU TAM estimate to greater than 35% annual growth, reaching over $120 billion by 2030, more than double the November 2025 Analyst Day estimate of approximately $60 billion at an 18% CAGR.

The Client and Gaming revenue of $3.61 billion was up 23% YoY but down 8.5% sequentially. Within it, Client CPU revenue fell from $3.10 billion to $2.89 billion sequentially (-6.8%), and Gaming fell from $843 million to $720 million (-14.6%).

Embedded at $873 million is sequentially lower (down from $950 million in Q4 2025) and only modestly above the year-ago $823 million.

For Q1, AMD targets a revenue midpoint of $11.2 billion, implying +46% YoY and +9% sequentially. This is the large acceleration that the market was looking for going into earnings.

AMD’s gross margin improved by 300bp from a year ago, although down 100bp sequentially. AMD’s operating and net margins both improved by 300bp YoY too, following the gross margin expansion.

AMD has guided a gross margin of 56% for Q2 and targets a long-term gross margin of 55-58%. These targets require monitoring, as they are not the level AMD has reached in the past two years. Moreover, the CFO commented that AMD’s current focus is topline growth, not margin optimisation. She argues that gross margin improvement will come over time through scale, both on ASP and cost reduction.

AMD’s EPS grew by 93% YoY to $0.85 (annualised to $3.4). The management commits to “delivering more than $20 in EPS over the strategic time frame (about 5 years)”, which would be a big change.

If AMD does reach that goal, a 30x P/E would value the company at $600.

AMD’s free cashflow has grown substantially to $2.6 billion.

AMD only spends under 4% of its revenue on CapEx.

AMD’s SBC is growing at over 30%, although they could justify it against continued revenue growth.

AMD spends a moderate amount of cash on share buy-backs.

Here are the key financial metrics from the past four quarters. I designed the table this way so we can focus solely on the key top-line, profit, and cash flow metrics.

Here are Wall Street's forward estimates. WS estimates forward revenue growth of 48% over the next 12 months, with margin expansion.

AMD’s valuation is at its 5-year high, by far.

Does it mean it’s expensive?

Looking at AMD’s EV/Sales vs Revenue Growth (NTM), AMD looks fairly valued relative to peers.

But on an EV/EBITDA vs EBITDA Growth basis (i.e. profitability), AMD appears expensive vs peers due to its narrower margins.

Fair Value?

AMD currently trades in line with Wall Street’s 12-month price target, which suggests the Street perceives it as rich.

If its forward revenue reaches $55.5 billion, the 12.8x EV/ Sales multiple is probably fair for its growth rate relative to peers but very expensive relative to its historical valuation.

You may argue that historical levels are useless right now, given the slower historical growth, too.

But it’s certainly difficult to suggest that AMD is “cheap” unless you think it will grow at more than 70% YoY, rather than the estimated 46-48%.

April - July is a bullish period for AMD.

AMD is no stranger to big drawdowns, with three large ones in the past three years, one of which hit 63%. But it has more than compensated for its historical performance in the recent rally.

Volatility is now nearing 100%, meaning these option premiums are not cheap.

AMD has certainly made an impressive run since 2016. It could be nearing the end of its cycle, with a blow-off top in the AI infrastructure trade in the Semis.

The blow-off top has now reached the 1.618 inverse extension of wave (4), which is a typical wave (5) target. However, there is room for it to extend further to the 1.764 level at $526.

Now let’s bring it back to AMD’s commitment of a $20 EPS in 3-5 years. First, that is an aggressive 5x from today’s level, implying 38% CAGR over 5 years, which is aggressive but feasible. But even if it reaches that target at a 30x PE for a mature company (NVDA trades at 26x NTM PE), the share price would target $600, in 3-5 years.

So the current rally has heavily borrowed some of the forward returns.

While AMD is positioned to accelerate its growth, much of its bright future is being priced in by the relentless short-term rally. At today’s price of $464, there is not a lot of margin of error for AMD’s execution. If the company fails to meet its growth estimates, the price could be repriced sharply.

Therefore, I am neutral on AMD here.