Shares of Advanced Micro Devices (NASDAQ:AMD) edged up 3.7% in premarket trading Thursday to $445.33, recovering from a 5.5% slide on Wednesday that pushed the stock to its lowest close since early July at $429.56. The rebound comes as investors assess the chipmaker's valuation amid lofty growth expectations.
According to initial consensus forecasts, AMD is expected to generate earnings of approximately $20 per share by 2028. To double from Wednesday's closing price of $429.56, the stock would need to reach $859.12, which would require a price-to-earnings multiple of 42.96 times those projected earnings. That would value the company at roughly $1.4 trillion, based on its current share count of about 1.63 billion.
On Wednesday, AMD traded at 57.3 times estimated 2026 earnings, highlighting the premium investors are paying for future growth. The stock has fallen 20.4% over the past five sessions but remains up 100.6% year-to-date, underscoring the volatile nature of high-growth chip stocks.
AMD's first-quarter 2026 results showed strong momentum: revenue hit $10.25 billion, up 38% year-over-year, driven by data-center revenue of $5.8 billion, which surged 57%. Non-GAAP earnings per share rose 43% to $1.37, while non-GAAP gross margin improved to 55%. The data-center segment now accounts for more than half of total revenue.
Looking ahead, AMD forecasts second-quarter revenue of $11.2 billion, with a possible variance of $300 million, and a non-GAAP gross margin of about 56%. These projections will be tested when the company reports after the market close on August 4.
In a strategic move, AMD announced a deal with Core Scientific (NASDAQ:CORZ) for over 500 megawatts of data-center capacity starting in 2027, with potential expansion to 2.5 gigawatts. Mathew Hein, AMD's strategy chief, said the agreement broadens infrastructure availability for clients deploying AMD AI solutions at scale. Wedbush analyst Matt Bryson noted the deal could expand AMD's reach beyond hyperscale customers, though no chip revenue has been reported from the agreement yet.
Analysts project annual revenue growth of at least 41% from 2026 through 2028, with earnings compounding at roughly 63% annually. However, a table from the original analysis shows that terminal valuation heavily influences returns: at 25 times 2028 earnings, the stock would be worth $500, a 16.4% gain; at 40 times, $800, an 86.2% gain; and at 42.96 times, the doubling target of $859.12.
Risks include potential spending cuts by hyperscalers, margin pressure, or deployment delays. Conversely, rapid adoption of AI accelerators and improving margins could make these risks seem overstated. The upcoming August 4 report will need to demonstrate robust margins and clear order visibility extending into 2027 and 2028 to justify the stock's premium valuation.
