The stock market continues its upward momentum. At present, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average are all either hitting new highs or getting close to them. Despite this, certain stocks have not kept up with the overall indices.
Today, we'll examine one such stock and explore the reasons behind its underperformance: Advanced Micro Devices ( AMD -0.23%). Does this present a potential entry point for investors?
Image source: Getty Images.
AMD's stock performance overview
To start, let's review how AMD has performed recently. Over the past three years, the stock has experienced significant ups and downs. The chart below shows AMD shares climbing from a low near $56 to a peak of $211 during an approximately 18-month rally beginning in late 2022.
Subsequently, the stock lost most of those gains before regaining traction about four months ago. Yet, after a strong rebound, AMD appears to have stalled once more. Overall, the stock is still up 31% for the year, though it is still about 25% below its record high.
AMD data by YCharts
What lies ahead for AMD
It's clear that AMD's stock has shown considerable volatility. However, the company is a key player in arguably the most dynamic sector of the market: semiconductors. Of course, AMD isn't expected to unseat Nvidia in the near future, as Nvidia's AI chips are still the top choice among many developers in the space.
Still, AMD is starting to attract more users to its products. Just recently, Elon Musk praised AMD’s chips, commenting that “AMD is now working pretty well for small to medium sized models.”
This is a positive sign for AMD, which is already manufacturing MI325 AI chips and has plans to launch the more advanced MI350 model in late 2025, with its flagship MI400 expected in 2026. Through these upcoming releases, AMD aims to compete head-to-head with Nvidia and capture a larger share of the booming AI chip market.
As a result, analysts on Wall Street have begun increasing their sales forecasts. Based on YCharts data, consensus projections for AMD's 2026 revenue have risen by nearly 8% over the past quarter. Additionally, according to Yahoo! Finance, analysts now expect AMD's revenue to hit $40 billion in 2026, which would represent a 22% year-over-year increase.
Although AMD’s revenue is still far behind Nvidia’s by a wide margin (Nvidia is projected to bring in over $200 billion for the twelve months ending January 26, 2026), AMD is making headway.
If AMD continues to narrow the gap with Nvidia, it could solidify its position as Nvidia’s primary competitor in the rapidly expanding advanced semiconductor market.
Should you consider buying AMD?
Here's the challenge for anyone thinking about buying AMD shares. The company is making notable strides into the AI chip field, which could result in significant returns in the coming years as its MI350 and MI400 chips reach mass production.
Yet, AMD still has a considerable distance to cover. Nvidia’s expected $200 billion in sales for fiscal 2026 highlights just how much further ahead it currently is in the AI chip sector. Even so, as the AI industry continues to grow rapidly, AMD’s stock is likely to keep climbing over the long term.
To sum up, investors should stay cautiously optimistic about AMD's prospects. The company is quickly emerging as a notable contender in the AI chip sector, but for now, Nvidia still leads the pack.
