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The stock market’s been having another decent year, powered by soaring tech names such as Palantir and GE Aerospace. Yet a more recent buzz this month has come from Advanced Micro Devices (NASDAQ: AMD) stock.
Up around 9.5% so far, the S&P 500 may not match the eye-watering 25% gains of both 2023 and 2024, but momentum’s still on the side of equities.
ADM surged on news that the chipmaker is joining forces with IBM to develop ‘quantum-centric supercomputing‘. The deal marks a major strategic step, signalling that AMD’s keen not only to fight for a bigger slice of the artificial intelligence (AI) and data-centre markets, but also to stake a claim in quantum.
With IBM as a partner, that ambition suddenly looks more achievable.
The excitement did not stop there. Truist Securities lifted its rating on AMD from Hold to Buy, while also hiking its price target from $173 to $213. Investors clearly liked the story, and the stock rallied strongly.
Add to this a supportive macro backdrop. With Federal Reserve chair Jerome Powell signalling that rate cuts could be imminent in light of job market concerns, the case for growth tech stocks looks compelling once more. Lower rates mean cheaper financing for data centre expansion, a trend that could directly benefit AMD.
Financial momentum
The numbers also suggest that AMD’s in better shape than some assume. The stock’s already up 36% in 2025, but interestingly, valuation multiples have fallen sharply since their frothy 2023 levels. This suggests that earnings are beginning to catch up with expectations.
The firm’s net margin has doubled to 6.4%, underpinned by improving revenue and profit growth. While it fell short of earnings expectations in both 2023 and 2024, it’s beaten revenue forecasts for five consecutive years – a sign that demand for its products remains strong.
The balance sheet‘s improving as well. Debt dropped from $4.73bn in the first quarter of 2025 to $3.89bn in the second, while free cash flow more than doubled over the same period.
That kind of financial discipline offers reassurance, particularly in a capital-intensive sector like semiconductors.
A few caveats
Of course, it’s never all plain sailing. AMD still faces intense competition from Nvidia, which dominates the graphics processing unit (GPU) market. Plus, it has the money and clout to take on anything AMD throws its way.
Internal developments have also raised eyebrows. Chief accounting officer Philip Carter resigned recently, while CEO Lisa Su sold 225,000 shares – moves that some investors may interpret as potential red flags.
An emerging contender
So is AMD stock worth considering? I think so. The IBM partnership looks like a genuine attempt to shape the future of computing, while improving margins and cash flow suggest the business has momentum. Add in the prospect of lower interest rates and a fresh analyst upgrade, and the story’s attractive.
That said, competition in chips is brutal, and insider share sales should never be ignored. As ever, investors are best served by diversification.
For those with an appetite for US tech though, AMD stock could represent an exciting opportunity – one that’s finally aligning innovation with stronger financials.
