The Motley Fool on $AMD (Nov 4, 2026)

All right, let's get to the big one. Uh, we got people rolling in here. AMD, you have put your your thoughts out there, I think, already on the Montly Fool's channel, but give us a synopsis of what you what you thought.

Very good quarter. Very good quarter. The stock, yes, did pull back 20 23% from I think from its 52- week highs. But they they gave exactly what what I wanted. There is a beat for the quarter, a beat for guidance.

We got some numbers for Q4. we finally have more numbers, actual numbers for 2027. So, the data center segment of course is the star of the show. I mean, after Intel's earnings report, um AMD was also down close to 10% because Intel reported a huge huge slowdown in in PC segment and all of that, but plus Intel is a more alo of a foundry story than than AMD because AMD doesn't have a foundry.

But AMD's data center growth is is the star of the show. Data center is next year going to be over 80% of all revenue. It's expected to grow next quarter by 50%. I think next quarter they're expected to generate $17 billion which is above what the market uh is expecting.

They're expected to grow revenue next year by over 80%. So now we already have a baseline for next year which is going to be over over 80%. Market was looking for 76% growth year-over-year.

So they're already beating these uh estimates and they can maybe do even more bit like Nvidia said for their next fiscal year. They're expecting to grow at least 70%.

Of course Nvidia is generating a lot more revenue than than AMD but it's also worth $5 trillion. But it's it was a good quarter. It was an excellent call because usually we get good quarter by MD and then during the call we always have to decipher what they're trying to say about the uh data center growth but now I guess now that they're ramping up their their Helios product which should compete much better with what Nvidia is offering the full rascale solution I guess they're way more comfortable putting out numbers because they have better visibility about what's about what's to come

and so stock initial reaction was very good today as we know but it has more to do with again headlines and and and elections than the actual business stock is is close to being flat right now.

That said, AMD is already up 120% year to date. AMD was a trillion dollar company a couple of weeks ago. Valuation was quite stretched. this is their quarterly numbers. So their data center uh is now a vast majority of their business whereas it was less than half the business in you know at the beginning of 2024 uh you know the client revenue uh you know continues to grow as well but this is now a data center business.

I do want to pull in uh to lead you into the valuation is a little a little questionable. uh 106 times earnings, 18 times sales. That's that's assuming that we're going to have 80% growth for a while.

I I am looking for their own EPS targets because they they did they did give us midterm guidance in their analyst day and I think they said they should be exceeding 20 $20 of earnings by 2030 or maybe 25 one of the two.

it is definitely expens on a trading basis it is very expensive on a forward-looking basis it's getting cheaper now. um one because the stock has pulled back and two because well analysts are just going to to revise their own estimates on on the upside with the with the big beat that AMD has posted

but it is a company that is I mean they themselves told us they are expected to grow quite rapidly over the next couple of years and the EPS target of at least 20 or at least 25 dollars of earnings by 2030 is is definitely feasible and okay maybe I don't want use a price to earnings multiple for 2030.

But um yeah, it's it's definitely more expensive than Nvidia. I think Nvidia is trading at 17 18 times forward earnings as of right now despite it being much much bigger than AM than AMD.

But yeah, AMD is now going to have to grow into valuation which which is why the stock is being pulled down from the high $650. As much as I would love AMD to continue to go up each and every day, u I think uh certain Travis likes to say at the end of the day, valuation matters.

I'm willing to bet that it would probably just the multiple growth probably beat the market. This is the price to sales multiple since the end of 2015. The multiple the multiple has grown at a 36.6% compound annual growth rate.

we've gone from a point4 multip well okay let's I'll I'll do the last five five five five five years six years let's say cuz 2015 this was a company that almost went bankrupt so okay we'll go to uh end of 2020 we still have a 8% price of sales multiple compound annual growth rate

eventually the multiple becomes a headwind for these companies. I don't know if that's right now. I don't know if it's going to be in five years, but eventually a price to sales multiple of what was it for 18.

Um you you got to live into that. And if you don't, you can go to, you know, we started 2015 at 0.4. I'm not saying it's going to point4, but if it goes to if it goes to six, you got to triple the size of the business to now have the same valuation.

And so that's the that's the real challenge here with a lot of these companies. And I think we're going to probably I wouldn't be surprised if we just kind of go through the next five years and a lot of these companies just kind of grind along and you look at the results and you go, what the the business is doing great and what changes is is that the multiple is just slowly coming down.

But um but yeah, I mean, you know, good quarter for them. I'm not shocked to see that the market is kind of a little less enthusiastic than they were, you know, 10 minutes after the release came out.

Well, price to free cash flow but so let's so let's talk about that because AMD has great numbers in the data center. We've talked about uh TPUs, tranium doing really well.

You can't they can't all grow 100% year-over-year in the data center unless data center spending is growing 100% times four yearover-year. And it's not it's growing, but it's not growing that quickly.

And so that's going to be the that's going to be the interesting thing for me to watch.

The the thing with AMD is that it doesn't need the the the market to double just because the their re their part of revenue is not that big. So they can grow super fast without the market growing faster

So it's true that companies will have to grow into valuation. Not everyone but certain but some companies will just grow into it naturally because their business suddenly accelerates from here and AMD's is an example.

The business is expected to accelerate from here which means if the price doesn't move that much the multiple will come down quite quickly especially at these at these growth rates.