Company of the Week - Advanced Micro Devices (14.08.2025)

AMD (Advanced Micro Devices) is a global leader in the production of advanced processors and graphics cards, delivering innovative solutions for personal computers, data centers, and gaming devices. The company has been competing for years with the biggest players in the semiconductor industry, such as Intel and NVIDIA, offering products characterized by high performance, energy efficiency, and competitive pricing.

AMD’s main products include:

• RYZEN Processors – a line of high-performance processors designed for personal computers and laptops, recognized for excellent performance and energy efficiency, offering an attractive price-to-performance ratio.

• EPYC Processors – a series of processors aimed at the server and data center market. EPYC stands out with a high number of cores, gaining increasing market share in the cloud and enterprise sectors.

• Radeon Graphics Cards – designed both for gamers and professionals working in 3D graphics, video editing, or scientific computing. Radeon competes with NVIDIA’s graphics cards, especially in the gaming GPU and parallel computing segments.

• Semiconductor Technologies – AMD is also a leader in innovative technological solutions, such as chiplet architecture, which enables efficient integration of multiple integrated circuits, as well as the use of advanced manufacturing processes. These semiconductor technologies allow the creation of smaller, faster, and more energy-efficient electronic components primarily made of silicon.

• Data Center and AI Solutions – the company also develops specialized products and platforms dedicated to artificial intelligence, machine learning, and high-performance computing (HPC), which require enormous computational power.

Outstanding Q2 Results

AMD reported excellent financial results for the second quarter of 2025, significantly surpassing analysts’ expectations and confirming the company’s strong position in the competitive semiconductor market. Revenues reached $7.685 billion, marking an impressive 32% increase compared to the same period last year. This significant growth is the result of effective strategy execution and rising demand for AMD’s advanced technologies across various market segments. Net profit reached $872 million, a 229% year-over-year increase, while earnings per share (EPS) amounted to $0.54, representing a 238% rise compared to Q2 2024.

AMD serves three main customer segments: individual and gaming clients (Client & Gaming), data centers and corporate solutions (Data Center), and the embedded systems and semiconductor segment (Embedded).

• The Client & Gaming segment generated $3.621 billion in revenue, a 69% year-over-year increase. Particularly, client segment revenues hit a record $2.5 billion, driven by strong demand for processors. This segment accounts for about 47% of the company’s total revenue.

• The Data Center segment brought in $3.24 billion, a 14% increase compared to the previous year, representing roughly 42% of total revenue.

• The smallest Embedded segment, responsible for roughly 11-12%, experienced a slight year-over-year decline, finishing with $824 million in revenue.

Development Strategies

AMD consistently pursues an ambitious strategy of investing in advanced semiconductor technologies and modern processor and graphics architectures to strengthen its position in a demanding market. The company pays particular attention to the server and data center segment, continuously expanding the EPYC processor lineup to meet the growing demand related to artificial intelligence. At the Advancing AI 2025 conference, AMD showcased a range of innovative solutions indicating the company’s development direction. The launch of the new AMD Instinct MI350 graphics card series and rack-scale “Helios” systems, featuring Instinct MI400 GPUs and EPYC processors, highlights AMD’s commitment to meeting the demands of generative AI and high-performance computing, offering scalability and high energy efficiency.

A significant challenge for AMD are changing geopolitical conditions, especially planned export fees on advanced chips, particularly to China. The Chinese market is viewed as one of the most important and largest global markets. A potential full return of export freedom for advanced technologies to China could bring the company billions of dollars in additional revenue. AMD sees this market as a key growth engine, especially in data centers, AI, and advanced graphics.

Market Environment

The semiconductor market is one of the most competitive and rapidly growing technology sectors worldwide. The key to success in this industry is continuous technological advancement, innovation in integrated circuit design, and improvements in manufacturing processes. AMD benefits from growing global demand for advanced processors and graphics cards in both consumer and business segments, including data centers and AI solutions. The company competes intensely with NVIDIA, which has dominated the graphics card and AI/data center technology markets for years. However, AMD’s latest products, such as new-generation graphics cards and processors, present a real challenge to the market leader.

Thanks to increasing performance and a favorable price-to-quality ratio, AMD is gaining more recognition among key customers and partners. With growing demand for computing power and advanced technologies, the company has real chances to compete effectively with NVIDIA and continue its dynamic market share growth.

Currently, NVIDIA holds a dominant position in the graphics card market, controlling about 80% of the AI GPU segment. Still, analysts predict that AMD could increase its share to about 10% by the end of 2025. Given that AMD’s products are cheaper than NVIDIA’s solutions — as confirmed by DeepSeek tests on older competitor models — this indicates a real opportunity for AMD to significantly expand its market presence by attracting more customers with a competitive price-to-performance ratio.

This market is also exposed to geopolitical challenges and related disruptions in the global supply chain. Particularly important are tensions between the United States and China, affecting export regulations and trade policies.

Valuation Overview

We analyze AMD’s valuation using the discounted cash flow (DCF) method. We emphasize that the following valuation is for informational purposes only and should not be treated as investment advice or a precise target stock price.

AMD’s average annual revenue growth is projected to be double-digit, expected around 25-30%. Our forecasts use a 30% growth rate, highlighting the importance of the company’s return to the Chinese market. Access to such a large and dynamic market is extremely valuable for AMD and may significantly contribute to revenue growth. The Chinese market, as one of the largest globally, offers vast development opportunities, forming the basis for our positive future outlook for the company.

Additionally, AMD products are priced more favorably compared to competitive solutions offered by NVIDIA. This gives AMD hope that an increasing number of tech giants will choose their processors and graphics cards for their data centers and AI solutions, which could further accelerate revenue growth and strengthen the company’s market position.

A key element of the valuation was determining the weighted average cost of capital (WACC). Based on the current market situation and characteristics of the tech sector, the cost of equity is estimated at about 12%. AMD has a moderate debt level, meaning while debt is not low, the company manages it effectively, so the cost of debt has a limited but important impact on the overall capital cost. For terminal values, we assumed a revenue growth rate of 2%, and other parameters were based on five-year averages.

Based on our assumptions, AMD’s valuation is $364.9 per share, approximately 110% higher than the current market price. The current stock valuation is thus significantly lower than our model suggests, indicating potential for growth. We believe AMD has prospects for further dynamic development, driven by rising demand for modern processors, graphics cards, and expansion into strategic markets such as China.

The AI, data center, and gaming markets are growing rapidly, and AMD is steadily increasing its presence in these segments. Investors increasingly appreciate the company’s innovation and its ability to gain market share, reflected in growth forecasts.

The valuation is highly sensitive to assumptions, so below we present a matrix of sales dynamics and WACC variations.

Chart Analysis

From a technical analysis perspective, AMD is in a clear upward trend, which is further confirmed by the company’s strong fundamentals. Factors favoring AMD include rapid technological development, a more attractive valuation compared to its main competitor, Nvidia, and, above all, growing demand for artificial intelligence solutions, as well as the planned return to the Chinese market. The current price momentum does not indicate a weakening of the upward trend, and if favorable conditions in the semiconductor industry persist, the continuation of the growth appears likely.

Żródło: xStation5