Why AMD's stock can keep soaring - even after nearly doubling this year

By Philip van Doorn

Also: A credit hiccup for banks, decision time for Medicare recipients, Bitcoin's drop, and a 'dumb' stock market

AMD's stock was up 94% for 2025 through Thursday.

This has been an incredible year for many large technology companies. But the recent gains in the stock market for the big players providing equipment to enable generative artificial intelligence may not signal an overheated market. They might be pointing to even greater gains to come.

Advanced Micro Devices Inc. (AMD) has been working to gain share in the market for graphics processing units used by AI technology developers, which has been dominated by Nvidia Corp. (NVDA) Analysts polled by LSEG have reacted to recent deal announcements by increasing their 2026 revenue estimates for the company by 12% since June 30. The analysts have also increased their 2027 sales estimates for AMD by 32% since June 30.

An investor might worry about the valuation of AMD's stock. At Thursday's close, the stock traded at a forward price-to-earnings ratio of 30 and a forward price-to-sales ratio of 9.5. Those compare to a forward P/E ratio of 23 and a forward P/S ratio of 3.2 for the S&P 500 SPX.

Now let's compare projected revenue and earnings-per-share compound annual growth rates (CAGR) for AMD, Nvidia and Broadcom Inc. (AVGO), which are the three largest semiconductor manufacturers in the S&P 500 by market capitalization. Projections for the full index are at the bottom:

     2-year projected revenue CAGR through 2027  2-year projected EPS CAGR through 2027  Forward P/E ratio  Forward P/S ratio 
   Advanced Micro Devices Inc.                                         31.9%                                   55.8%               39.0                9.5 
   Nvidia Corp.                                                        27.3%                                   31.1%               30.0               17.2 
   Broadcom Inc.                                                       31.1%                                   33.0%               38.3               19.1 
   S&P 500                                                              6.5%                                   13.7%               23.0                3.2 
                                                                                                                                              Source: LSEG 

The projections are based on Thursday's closing prices and consensus 12-month estimates for revenue and earnings among analysts polled by LSEG. The estimates are adjusted by LSEG for calendar years for companies whose fiscal years don't match the calendar. For the S&P 500, the estimates are weighted by market capitalization.

P/E and P/S valuations are in the right-hand columns. AMD has the highest projected growth rates for sales and EPS for the next two years.

Considering that AMD's projected sales and EPS CAGR are more than four times those of the S&P 500, some investors might feel comfortable enough with the valuations.

But even these projections for AMD might not be high enough. MarketWatch's Emily Bary and Britney Nguyen explained why growth projections for AMD might be far shy of what actually takes place over the next few years.

More coverage from MarketWatch's technology team:

-- AI has already disrupted hiring for these jobs, as adoption nears a tipping point

-- Did Salesforce finally prove the bears wrong? The stock is rising off an upbeat AI forecast.

-- Amazon's stock comeback hinges on AWS hitting this magic number.

-- This AI stock has soared 1,600% in three years - and Deutsche Bank predicts more gains

A related investment theme: This strategy lets you invest in the AI boom and reduce risk at the same time

Nontech stocks riding the AI wave

Here's how the 11 sectors of the S&P 500 have performed this year through Thursday, while the full index has returned 13.9%. All the figures include reinvested dividends.

All 11 sectors of the S&P 500 were up for the year through Thursday on a total-return basis with dividends reinvested. The utilities sector was in the lead with a 24% return. The full index was up 13.9%.

MarketWatch's Gordon Gottsegen and Joseph Adinolfi spoke with professional investors about how the utilities sector has turned to a long-term growth path tied to the AI-related demand for new and bigger data centers.

And in case you think the utilities sector has gotten too frothy, you might take comfort from this summary of forward P/E ratios for the S&P 500's sectors. They are sorted by declining P/E ratios, with the full index at the bottom.

   Sector or Index           Forward P/E  Forward P/E to 5-year average  Forward P/E to 10-year average 
   Real Estate                      35.7                            88%                             88% 
   Information Technology           30.5                           119%                            138% 
   Consumer Discretionary           28.9                           107%                            120% 
   Industrials                      24.3                           118%                            129% 
   Communication Services           21.0                           113%                            125% 
   Consumer Staples                 20.9                           102%                            105% 
   Materials                        19.7                           110%                            113% 
   Utilities                        19.4                           107%                            109% 
   Health Care                      17.3                           102%                            106% 
   Financial                        16.4                           114%                            120% 
   Energy                           15.2                           110%                             66% 
   S&P 500 Index                    23.0                           115%                            123% 
                                                                                           Source: LSEG 

These P/E ratios and the long-term averages are based on share prices and rolling 12-month earnings-per-share estimates among analysts polled by LSEG. The utilities sector is the fourth-least expensive based on the current forward P/E ratios. This sector is trading at a 7% premium to its five-year average forward P/E and at a 9% premium to its 10-year average. The full S&P 500 is trading at a 15% premium to its five-year average P/E and a 23% premium to its 10-year average P/E valuation.

Banks kick off earnings season with a warning about credit quality

Steve Gelsi leads MarketWatch's coverage of U.S. banks, which kicked off third-quarter earnings season this week. The big item that helped cause some regional-bank stocks to decline was concern over commercial loan losses. Overall loan quality for U.S. banks remained strong, but JPMorgan Chase & Co. (JPM) Chief Executive Jamie Dimon said during the bank's earnings call that "everyone should be forewarned" about potential commercial loan losses in the event of an economic slowdown.

Here is a sampling of Gelsi's related banking-industry coverage this week:

-- Fifth Third looks to calm investors, says loan losses are falling

-- Zions takes $50 million loan loss

-- Jamie Dimon warns, 'When you see one cockroach, there are probably more,' after Tricolor loan loss

-- Bank of America is beating rivals with this strategy, and it's not costing that much

More about Medicare

This year's Medicare open enrollment ends on Dec. 7.

Medicare's annual open-enrollment period started Wednesday and ends on Dec. 7. This is the time each year when Medicare participants can decide on coverage details, and it is important to take action and learn about your choices. A lot of money may be on the line.

Traditional Medicare coverage is designed to cover 65% of medical costs for recipients, who can begin to receive benefits when they turn 65. But 35% of infinity is still infinity - you need to take further steps to manage potential costs in the event that you need very expensive healthcare services. Should you sign up for a Medicare Advantage plan to manage your total potential outlay? Or should you sign up for supplemental insurance to cover costs not covered by Medicare?

MarketWatch's Beth Pinsker took a deep look into different circumstances and decision points for Medicare recipients - including location, because rules and available programs vary by state. Don't wait to learn about what is possible and understand your particular decision points.

More from Beth Pinsker: My mom has dementia, but I can't afford to care for her unless I get paid to do it

Questions about an estate plan

Alessandra Malito writes the Help Me Retire column. This week, she answered questions from a couple wondering how aggressively they should invest the money they plan to leave for their children.

More on retirement planning:

-- 'It's getting scary close to retirement': We're 70. We have no debt, no stocks and $275K in savings. Are we in trouble?

-- 'My monthly expenses are $6,500': I'm 64, have $1.2 million in a 401(k) and two mortgages. Can I afford to retire?

Here is where you might find a job

Would you move to another state for an employment opportunity?

MarketWatch's Jeffry Bartash listed the states with the highest and lowest percentages of job openings.

Bitcoin keeps things real for investors

Bitcoin (BTCUSD) was trading at $105,548 late Friday morning. The virtual currency's value in dollars was down 20% from a record high of $126,273 on Oct. 6, according to data provided by CoinDesk Indices.

Mark Hulbert looked behind the market action and explained what Bitcoin's decline means for traders and investors.

More from Hulbert:

-- Jerome Powell may have just given stock investors a new reason to be worried

-- How to build an anti-meme portfolio

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10-17-25 1247ET