Advanced Micro Devices (AMD) is a chip giant that has delivered market-beating returns to shareholders. In the last three years, AMD stock has returned 500%, while cumulative returns are closer to 10,000% since October 2016.
AMD continues to benefit from strong demand for AI chips and server processors. However, the raw materials needed to build them are in short supply. So, recently AMD CEO Lisa Su traveled to Seoul to meet the people who manufacture these parts.
More Top Stocks Daily: Go behind Wall Street’s hottest headlines with Barchart’s Active Investor newsletter.
www.barchart.com AI Demand Reshapes AMD's Business
At the Citi Global TMT Conference on Sept. 8, CFO Jean Hu called AI "the most consequential technology transformation." AMD now expects its total market opportunity to reach $2 trillion by 2030.
Three anchor customers are leading the way: Meta Platforms (META), OpenAI, and Anthropic. Hu said each one plans deployments measured in multiple gigawatts.
The server chip business is growing even faster:
Server revenue grew more than 50% in the first quarter and more than 70% in the second, Corporate Vice President Matt Ramsay said at the KeyBanc Technology Leadership Forum on Aug. 11. AMD expects growth above 80% in the second half of 2026. It expects at least 70% growth in 2027, on a much larger base.For context, Ramsay said 15% to 20% growth used to count as a phenomenal result in servers. Hu also said AMD expects its data center business to double next year.
"I think overall, supply is very tight," Hu told the Citi audience. She pointed to shortages in wafers, advanced process nodes, high bandwidth memory (HBM), packaging, substrates, and smaller components.
Memory is a significant pain point for the chipmaker. Ramsay explained at KeyBanc that every server AMD sells also needs memory chips. He said suppliers usually come through when they get accurate forecasts and enough lead time. "It's when you come and ask for stuff way underneath lead time where things get a little more complicated," he said.
Lisa Su's Seoul Visit Signals Deeper Korea Ties
Speaking to reporters in Seoul on Wednesday, Su said AMD continues to explore partnership opportunities with Samsung Electronics in memory and foundry, Reuters reported.
She had already met with executives at SK Hynix (SKHY) and planned to meet Samsung next. "I think we very much rely on the Korean supply chain," Su said. She added that Samsung and SK Hynix are "key for us to accomplish our broad ambition in data centres."
Her message to memory suppliers was simple: "build faster, as fast as possible."
In the meantime, AMD is "working with our customers to optimise their memory footprint so that we can satisfy more computing going forward," she said. Put simply, AMD is helping customers do more with less memory.
The groundwork for these talks was laid in March. That's when AMD and Samsung signed a memorandum of understanding to expand their partnership on memory supplies for AI infrastructure, Reuters reported. The two companies also agreed to discuss a foundry deal. Under that kind of deal, Samsung could manufacture next-generation AMD products.
Why a Samsung Foundry Deal Matters for AMD Stock
Right now, AMD leans heavily on TSMC to make its chips. Ramsay said AMD is TSMC's third- or fourth-largest customer, depending on the quarter. AMD also announced a $10 billion investment in Taiwan's chip supply chain, most of which is tied to packaging capacity.
At Citi, Hu said TSMC remains AMD's primary wafer supplier, but Ramsay left the door open to other suppliers. "Anything that's advanced packaging or anything that's advanced wafers, we're going to evaluate and do due diligence on technology from every vendor in the market," he said.
So a Samsung deal would most likely complement AMD’s existing partnership with TSMC and not replace it entirely. When demand runs ahead of supply, increased manufacturing will generate additional profits.
Is AMD Stock a Buy Now?
Valued at a market cap of $1.05 trillion, AMD stock trades at a premium multiple. The chip stock can sustain an elevated valuation if underlying earnings growth supports it.
Analysts tracking AMD stock project revenue to increase from $34.64 billion in 2025 to $225 billion in 2030. Over that period, free cash flow is estimated to rise from $5.52 billion to $61 billion. If the tech stock is priced at 30x forward FCF, it could surge 80% within the next 40 months.
www.barchart.com Out of the 47 analysts covering AMD stock, 37 recommend “Strong Buy,” two recommend “Moderate Buy”, and eight recommend “Hold”. The average AMD stock price target is $653, marginally above the current price of $646.
At the Goldman Sachs Communacopia + Technology Conference on Sept. 11, Ramsay said AMD's long-term earnings target is now "significantly more than $20" per share.
AMD also wants more than half of a server CPU market it expects to top $220 billion by 2030. Ramsay said that works out to a $100 billion server business.
However, investing in AMD stock at current prices carries some risk.
First, the company’s first full rack AI system is only starting to ramp. KeyBanc analyst John Vinh noted that a rival had "quite a few growing pains" in a similar move. Second, Hu said gross margin will dip slightly below the 56% guided for the third quarter as the MI450 ramps. Third, tight supply could cap upside even amid strong demand.Meanwhile, AMD’s management remains optimistic. On Helios, Ramsay said "there's no smoking guns" and that customers are already running code on sample racks.
The talks with Samsung are a small piece of the puzzle. Basically, AMD should produce enough chips to meet customer demand. Every new supply partner helps close that gap. Whether it makes AMD a buy depends on how much you trust management to execute.
On the date of publication, Aditya Raghunath 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.
More news from Barchart
How to Play AMD Stock as It Continues to Explore a Foundry Partnership With a Korean Tech Giant With a Yield Fast Approaching 5%, Nike Says Its Dividend Is the ‘Top Priority’ Lucid Stock Might Have Bottomed, But Only Speculators Should Bet on LCID Here ARGX Stock Sinks as Argenx Scraps Late-Stage Trial