Advanced Micro Devices (AMD) faces valuation concerns as its stock trades at a forward 12-month price/earnings (P/E) ratio of 31.42, significantly higher than the Zacks Computer & Technology sector average of 23.43. Compared to rivals NVIDIA (NVDA) and Broadcom (AVGO), which have P/Es of 21.84 and 25.84 respectively, AMD’s shares are considered overvalued.
AMD’s stock has increased by 10.2% year-to-date (YTD), outperforming the sector’s decline of 1.8%. However, the company forecasts first-quarter 2026 revenues at $9.8 billion (±$300 million), a 32% year-over-year increase but a 5% sequential decline. The revenue growth will be supported by the Data Center, Client, and Gaming segments. AMD anticipates a slowdown in its gaming sector for 2026, attributed to a significant decline in semi-custom SoC revenues, though recovery is expected in 2027 with the launch of Microsoft’s next-generation Xbox.
Projected earnings for the first quarter of 2026 are estimated at $1.29 per share, reflecting a 32.3% increase from the previous year. AMD’s long-term prospects are optimistic, particularly in the data center AI sector, which it expects to grow at a compound annual rate of over 80% through 2028.
