Advanced Micro Devices (AMD) already has plenty riding on the AI infrastructure boom. AMD stock has skyrocketed an impressive 171% year-to-date, outperforming both the broader market and the tech-heavy Nasdaq Composite ($NASX).
But the next big opportunity in AI may not look anything like ChatGPT. And AMD appears to be preparing for that possibility with its recent $8.2 billion acquisition of World Labs. The deal gives AMD a foothold in spatial intelligence, an area that could become increasingly important as AI moves from screens into robots, machines, and physical environments.
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Is it time to grab AMD stock now?
www.barchart.com AMD Wants to Know What Comes After Generative AI
World Labs is working on getting AI to understand the physical world around it. Its models are intended to generate, recreate, and simulate interactive 3D worlds using text, graphics, and video. In addition, the company is creating technology for robotic learning and simulation.
This brings World Labs close to physical AI, a market that is still developing. The reason for AMD to acquire World Labs is to get closer to the workloads before they shape the next generation of computing infrastructure. AMD claims that World Labs' model expertise will provide its engineers with greater visibility into how AI workloads are changing, allowing them to influence future hardware, software, and system roadmaps.
The $8.2 Billion Isn't a Cash Drain
While AMD is acquiring World Labs for roughly $8.2 billion, it isn’t paying this amount in cash. Instead, the transaction is entirely an all-stock deal, subject to customary adjustments. The number of shares to be issued will be disclosed when the deal closes by the end of 2026.
Although this will cause dilution, AMD isn't taking cash off its balance sheet to fund the acquisition. Only time will tell whether the technology and talent AMD is acquiring will eventually generate enough strategic value to justify the stock it is giving up.
AMD Has Something to Protect
It is worth noting that World Labs won’t help generate billions of dollars of revenue for AMD now. In fact, this acquisition will add value indirectly through better products, stronger customer relationships, and earlier positioning in emerging AI markets. Chip design takes years. With World Labs, AMD can anticipate how models will evolve and what those models will require from processors, memory, networking, and complete systems to design hardware for it accordingly.
The risk is that investors are already getting impatient with how high AI spending is and not generating enough earnings growth. And AMD is paying $8.2 billion mostly for future strategic value, research talent, and technology, rather than a business already producing revenue at that scale now. Then there is also the case of dilution. However, spatial intelligence, robotics, and physical AI have significant long-term potential. Any new wave of AI will take time to be commercially successful.
And it is not like AMD is a company that is struggling or in need of a strategic acquisition right now to save its business. It has an existing AI business that is already scaling rapidly. In the second quarter, AMD generated $11.5 billion in revenue, a 50% increase from the year-ago quarter. Data Center revenue increased 107% year over year (YOY), driven primarily by demand for EPYC processors and Instinct MI350-series GPUs. For the first six months of 2026, Data Center revenue reached $12.5 billion, up 81% YOY.
AMD has also been building relationships with some of the biggest AI companies in the world. OpenAI agreed to deploy up to 6 gigawatts of AMD GPUs across multiple generations. Separately, Meta Platforms (META) has agreed to deploy up to 6 gigawatts of AMD Instinct GPUs under a multi-year, multi-generation partnership. Anthropic has also agreed to deploy up to 2 gigawatts of AMD Instinct MI450 GPUs through Helios.
On the balance sheet, AMD had cash, equivalents, and short-term investments totalling $13.1 billion. It also generated $1.6 billion in free cash flow in the quarter. Analysts even expect AMD’s earnings to increase by 81% in 2026, followed by another 105% in 2027.
Is AMD Stock a Buy Now?
Ultimately, the semiconductor industry rewards companies that can anticipate the next computing cycle. We have already seen that play out with Nvidia (NVDA), whose early investments in GPU computing helped it carve out a dominant position in AI. AMD is currently benefiting from the AI infrastructure boom through EPYC CPUs, Instinct GPUs, and rack-scale systems. In fact, AMD has been trying to position itself as an “escape hatch” for AI companies looking to reduce their dependence on Nvidia. With World Labs, AMD is now making a bet on what could come after today's dominant AI workloads.
But this is a long-term game, and AMD is a buy now only for investors willing to look past the near-term payoff and wait for its investments in AI infrastructure and next-generation workloads to translate into sustained growth.
Wall Street remains very bullish about AMD stock. Of the 48 analysts that cover AMD, 38 rate it a “Strong Buy,” while two recommend a “Moderate Buy,” and eight recommend a “Hold.” The stock is trading close to its average price target of $627.79. Furthermore, the high-end price target sits at $1,250, indicating a potential price increase of 106% from current levels.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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