AMD: Has the Easy Money Already Been Made?

On the May 11 episode of The Morning Filter podcast, Morningstar chief US market strategist Dave Sekera dissected Advanced Micro Devices’ AMD blowout earnings report and Morningstar’s sizable fair value increase. Here’s an excerpt from the episode.

Susan Dziubinski: Let’s turn to some new research from Morningstar about companies that reported last week, and we’ll stay aboard the tech train. We had AMD stock up 17% after earnings, and Morningstar raised its fair value estimate on the stock to $450. Unpack those results for us, Dave.

David Sekera: Like we talked about last week, we knew earnings were going to be strong, considering just how much Intel INTC had already surprised to the upside, and I’d say that AMD’s results and their guidance still blew away that already-high expectation coming into the numbers. I read through our research here, and what stood out most to me was just how much AMD increased their guidance as compared with the guidance they gave six months ago. They doubled the total addressable market for server CPUs for data centers. They’re now looking at or estimating that to be a $120 billion total addressable market by 2030. That’s double the $60 billion number that they thought it was going to be just six months ago. Looking forward, CPU revenue in the second quarter, they’re looking for that to accelerate here to 70%. That’s up from 50% this past quarter.

It sounds like they’re already planning for similar types of growth rates into 2027 as well. I took a quick look at our updated model after that big fair value increase. We’re looking for a five-year compound annual growth rate for revenue of 36%.

Let me just put that into context real quick. We looked at the company; they did $35 billion in revenue in 2025. We’re currently forecasting them to do $47 billion in 2026. By 2030, that compound annual growth rate puts their revenue at $165 billion. Now, of course, with those kinds of growth rates, being able to charge whatever they want to charge, getting huge margins, our compound annual growth rate for earnings over that same time period is 66%. The stock right now is trading at 60 times our 2026 earnings estimate, which sounds like a really high valuation, but based on those kinds of growth estimates, it’s only trading at 35 times our 2027 earnings estimate. Again, you really have to believe in this one to get to those kinds of valuations.

Dziubinski: Dave, after the fair value increase—Morningstar’s fair value estimate increase—from that perspective, is the stock attractive?

Sekera: Attractive? Not really. It’s at fair value right now. It’s a 3-star-rated stock. Having said that, I do prefer AMD over Intel. I have to note that AMD was one of the best ideas in the semiconductor space from our equity team at the beginning of March. On March 31, this was a $200 a stock. We’ve now raised our fair value up to $450. At this point, it seems like the easy money is already behind us after having been one of our top picks.

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