AMD: A Semiconductor Gamble

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Advanced Micro Devices, a name once murmured only amongst enthusiasts, now finds itself entangled in the rather vulgar scramble for artificial intelligence supremacy. It supplies the innards of Sony’s PlayStations – a fleeting amusement for the masses – and the increasingly ubiquitous, and largely unnecessary, infotainment systems of Tesla’s electric vehicles. But it is in the data centre, amongst the blinking lights and the hushed hum of servers, that AMD now hopes to establish itself, and, naturally, to profit handsomely.

Nvidia remains, for the moment, the acknowledged leader in this peculiar field, a position secured by years of diligent, if uninspired, engineering. AMD, however, is poised to launch a new generation of graphics processing units, a gesture not unlike a minor nation declaring war on a superpower. The outcome is, predictably, uncertain.

The company’s stock enjoyed a considerable surge last year, fuelled by the prevailing hysteria surrounding all things ‘AI’. It has since retreated, a correction of some 21%, leaving investors to ponder whether this presents a genuine opportunity, or merely a temporary respite before further decline. One suspects the latter, though hope, as they say, springs eternal, particularly amongst those with capital at stake.

A Performance Increase, or a Costly Illusion?

AMD’s current flagship, the MI355X, is a commendable, if unremarkable, piece of machinery. It is built upon the company’s ‘Compute DNA’ architecture – a rather grandiose title for a collection of silicon and circuitry – and is said to rival Nvidia’s Blackwell. Oracle, a corporation not known for its discernment, has ordered a considerable quantity – over 131,000 units – presumably in the belief that more is always better.

The forthcoming MI450 Series, however, is where the real ambition lies. This, combined with a new ‘Helios’ rack system – a term redolent of ancient mythology and excessive marketing budgets – promises a staggering 36-fold increase in performance. Such claims should, of course, be treated with a healthy dose of skepticism. One recalls the promises of perpetual motion and other equally fantastical schemes.

The MI450 will undoubtedly be more powerful than Nvidia’s Blackwell, at least initially. Nvidia, however, is not standing still. They are already preparing a counter-offensive, based on a new ‘Rubin’ architecture. This will be a contest of escalating claims and diminishing returns, fuelled by the insatiable demands of AI developers. It is a technological arms race, and, as always, the ultimate beneficiaries will be the manufacturers of weaponry.

A Hundred Billion Dollar Fantasy?

AMD generated $24.3 billion in revenue during the first three quarters of 2025 – a sum that, while substantial, hardly justifies the breathless pronouncements of analysts. The data centre segment accounted for $11.2 billion of this, driven by the aforementioned AI craze. The company will report its fourth-quarter results in February, at which point we shall learn whether this year’s performance has lived up to the hype.

AMD now believes its data centre business could generate up to $100 billion in revenue over the next few years. This is predicated, in part, on a deal with OpenAI, a start-up that has captured the public imagination with its chatbots and other digital novelties. AMD will supply up to 6 gigawatts of GPU capacity by 2030 – a commitment that is either remarkably optimistic or simply reckless.

The OpenAI deal is not, perhaps, a perfect arrangement, but it is essential for AMD to gain a foothold in the AI market. To ignore the industry’s leading software start-up would be akin to a ship captain refusing to consult the charts.

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A Price Worth Paying?

AMD’s adjusted earnings over the last four reported quarters were $3.73 per share. This places its price-to-earnings ratio at 55.6, as of January 12th. Nvidia, by comparison, trades at a ratio of 45.6. The discrepancy is difficult to justify, given Nvidia’s larger and faster-growing data centre business.

Wall Street analysts predict AMD’s earnings could reach $6.49 per share in 2026, placing its forward price-to-earnings ratio at a more palatable 32. This, of course, assumes that the analysts are correct – a proposition that should be viewed with extreme caution. If they are, then the stock would have to climb by 42% just to match Nvidia’s current ratio.

If AMD’s data centre business does, indeed, generate $100 billion in revenue over the next few years, then its stock is probably a bargain at the current price. The recent 21% dip, therefore, might present a buying opportunity for those with a taste for risk and a willingness to ignore the warning signs. One suspects, however, that it is more likely to be a mirage.

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2026-01-16 00:23