So, Advanced Micro Devices – AMD, if you’re keeping score – had a bit of a wobble at the start of 2026. Not a crash, mind you, more of a slightly undignified stumble. Down about 8% year-to-date, though it’s rallied a bit since. It’s always a little unnerving when a company you’ve vaguely been aware of for years suddenly starts behaving like a proper, grown-up investment. Investors, naturally, are doing that thing they do – weighing the price against the risks. Specifically, the rather large price against the risks in the AI chip market, where it’s currently playing tag far behind Nvidia. It’s like trying to win a race against a cheetah on roller skates.
But here’s where it gets interesting. People seem to be overlooking something rather crucial: AMD’s free cash flow. Now, free cash flow, for the uninitiated, is essentially the money a company has left over after paying all its bills. It’s the stuff that can be used for, well, pretty much anything – paying dividends, buying back shares, or, if they’re feeling extravagant, commissioning a solid gold statue of the CEO. And AMD’s has been surging.
In the fourth quarter, it nearly doubled year-over-year to $2.1 billion. Which is, let’s be honest, a substantial amount of money. The full year brought a record $5.5 billion. This wasn’t some fluke, either. It was driven by a rather impressive jump in data center revenue. Apparently, people are building a lot of data centers. Who knew? It’s a bit like discovering there’s a sudden, insatiable global demand for shoelaces. You’d think someone would have noticed sooner.
Lisa Su, AMD’s CEO, attributed this success to “broad-based demand for high-performance computing and AI products.” A perfectly reasonable explanation, though it does leave one wondering what exactly people are doing with all this high-performance computing. Solving world hunger? Perfecting the art of toast? The mind boggles. Regardless, revenue was up 34% year-over-year, and adjusted net income soared 42% to a record $2.5 billion. Numbers like that tend to get your attention, even if you’re a bit of a financial Luddite like myself.
Now, the AI chip market is a competitive beast, and AMD faces genuine challenges. But this surging free cash flow suggests a business that might be more resilient than the stock price currently reflects. Currently, the shares are trading at 42 times 2026 free-cash-flow estimates. A bit steep, perhaps. But that multiple drops to 16 on 2028 estimates. Which, if accurate, suggests a rather compelling opportunity. It’s a bit like finding a slightly dented but perfectly functional antique – a bargain, if you can overlook the minor imperfections.
AMD’s upcoming data center products, particularly its Helios computing platform for AI workloads, could sustain this momentum. Higher-margin products, fuelled by that healthy free cash flow, could make the stock a rewarding investment over the next few years. Of course, predicting the future is a notoriously unreliable business. But as a wise man once said (probably), a little optimism never hurt anyone. Unless you’re a pessimist. Then it probably just annoys them.
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2026-02-28 17:24