AMD’s Wild Ride May Soon Hit a Speed Bump

Advanced Micro Devices (AMD) has been at the forefront of the global semiconductor industry’s surge, with its shares rising 108.16% in the last three months. The company’s data center Graphics Processing Units (GPUs) and server Central Processing Unit (CPU) business have driven this growth, but Daiwa Securities analyst Louis Miscioscia warns that the recent share price surge may soon moderate.

Miscioscia downgraded AMD stock to “Outperform” from “Buy,” citing concerns over its valuation. This is not without precedent: NVIDIA’s shares skyrocketed in 2020 after announcing its Ampere GPU architecture, only to plummet when investors questioned its valuation. Similarly, Miscioscia believes that AMD’s valuation has become unsustainable.

AMD’s Q1 FY2026 results were impressive, with revenue climbing 37.8% year-over-year (YOY) to $10.25 billion and adjusted EPS jumping 42.7% from the same period last year to $1.37. The company’s data center business is driving this growth, with a 57% YOY surge in data center revenue to $5.8 billion.

However, Miscioscia notes that AMD’s forward adjusted earnings and sales multiples sit at a premium not just to the industry average but also to its own five-year historical multiple. This suggests that investors are pricing in unrealistic growth expectations. The analyst community has been overwhelmingly bullish on AMD stock, with 35 out of 45 analysts carrying a “Strong Buy” rating.

While this consensus view may seem like a contrarian move, it’s worth considering whether the rest of the market should be taking caution as well. In 2020, the semiconductor industry saw a significant correction when investors realized that their growth expectations were too high. The same could happen again if investors fail to temper their enthusiasm for AMD’s valuation.

Management has flagged inferencing and agentic AI as the forces accelerating demand for high-performance CPUs and accelerators. However, supply chain disruptions and chip shortages have been a persistent issue in the industry, and it remains to be seen whether AMD can navigate these challenges successfully.

In the short term, investors may want to reassess their expectations for AMD’s valuation. While the company’s Q1 FY2026 results were impressive, its valuation has become unsustainable. It’s possible that investors are pricing in unrealistic growth expectations, which could lead to a correction if they fail to temper their enthusiasm.

Looking ahead, AMD is well-positioned for success due to its data center business and server CPU business gaining traction. As agentic AI continues to gain ground, AMD’s valuation may eventually come back into line with its fundamental performance. However, investors would do well to take a cautious approach when it comes to AMD stock, given the unsustainable nature of its current valuation.