Oh Come On!
Investor, Venture Capital Background
AMD's $518 share price is far ahead of what it earns: less than $7 a share annualized, in the greatest earnings environment in its history. Annualizing its $11.5B quarterly revenue to $46B puts it at 18 times revenue, a 5.5% yield even if it had no taxes, employees or cost of goods and simply collected the money. x.comÂ
AMD's fundamentals are very strong, but about 50x 2028 estimated earnings is a price that cannot be normalized for any company, under an investment philosophy that may be wrong. Per PrivPubInvestor, the stock rose from $450 to almost $650 in two weeks on CPU demand, analyst price-target hikes, new partnerships and the Helios rollout. x.com x.comÂ
AMD is trading at its highest valuation in a decade, and another comparison puts it at about three times Nvidia's valuation. x.comÂ
AMD is held for its strong earnings growth, which, when it continues into the next quarter, is a reason to own a company beyond a good-looking chart. Price and risk then decide whether to take the trade. x.comÂ
AMD is the textbook example of a stock with too much priced into its valuation: it delivered flawless earnings and still sold off. x.comÂ
AMD is no longer cheap. It trades at about 60x next-twelve-months earnings and 25x management's long-term EPS target of $20 or more. x.comÂ
AMD's bullish hardware case depends on realized GPU prices and costs, not shipments alone: lower selling prices need not lower manufacturing costs. In a conditional September 23 model stress, GPU prices 15% below the reference path with fixed unit costs cut weighted 2030 revenue from $347.84B to $314.76B and free cash flow from $90.13B to $68.59B, about 24% lower. These are weighted outcomes across 16 scenarios, not the standalone Base case. x.comÂ
AMD now has to be extraordinary to justify its valuation, because it is priced on what it must deliver in 2027, not on past results. Despite revenue up 50%, data center up 107%, triple-digit profit growth and above-consensus guidance, the stock fell about 8% after hours; great is not enough when great is already priced in. x.comÂ
AMD looks overvalued because its price already assumes near-perfect execution. Even if revenue grows 35% a year, per Lisa Su's guidance, from $41B to about $185B by 2031, with 25% FCF margins, the $1.07T valuation is about 21x 2031 free cash flow today. At a 45% growth rate it would still be 16x, which is not cheap. Su is known for beating expectations, but expectations are now high. x.com x.com x.com x.comÂ
AMD and Intel look expensive only if agentic AI fails to accelerate CPU demand, and sell-side estimates probably do not yet capture all of that acceleration. AMD trades at 58x and Intel at 68x NTM EPS, with the sell side modeling EPS CAGRs through CY2029 of 66% and 82%. Beating CY2029 estimates of $31.50 and $4.75 by 30-40% would lift those CAGRs to about 78% and 97%. Despite frothy multiples, that EPS growth is hard to argue with. x.comÂ
AMD is no longer cheap after surpassing the $600 base case originally set for 2029 while it is still 2026. At a 55x forward P/E the market is paying up for its big growth, even though consistent beats and sharply raised long-term guidance show the model working and analysts likely still underestimate its earnings power. It is a hold here, not a buy. x.comÂ
