For shareholders of Advanced Micro Devices (AMD), the past few months have been disappointing. After a surge in early October 2024 on news that the company would supply processing chips for OpenAI’s ChatGPT, the stock has stagnated alongside many others in the artificial intelligence (AI) space.
Nevertheless, AMD remains a company worth watching, and perhaps even buying on dips. Here are three key developments potential investors should closely monitor over the next year, as these advancements will ultimately guide the stock’s price toward future levels.
The partnership with OpenAI is not the end. Following that agreement, AMD also signed a deal with Oracle, an AI data center operator, to supply 50,000 GPUs (AI processing chips) starting later this year, with an option to increase supply volume thereafter.
Just this week, India’s Tata Consultancy Services announced it would soon begin adopting the Helix rack-scale AI architecture launched by AMD at the CES trade show in early January 2025. The company had previously committed to achieving 80% annualized revenue growth from its AI data center business for at least the next few years.
Although it remains unclear which organizations will become its next major customers, it is evident that AMD has now captured the attention of some renowned players within the industry. Therefore, it would not be surprising to see at least a few more high-profile deals materialize in 2026.
These deals will have an obvious quantitative impact. They will also represent a qualitative leap. That is to say, these transactions will definitively establish AMD as a genuine AI participant, a status not yet fully solidified, placing it alongside companies like Nvidia, Microsoft, Amazon, and Alphabet’s Google – all of which currently possess their own self-developed AI processing chips.
To be clear, this doesn’t mean AMD will ultimately reach Nvidia’s scale. However, merely becoming a legitimate contender in this field would be sufficient to support its arguably controversial valuation.
Finally, although this is clearly the least certain of the three predictions, AMD’s stock price is expected to perform well by the end of 2026 – provided it experiences a notable correction beforehand.
This forecast is based on the assumption that a broader correction is in store for most AI technology stocks. However, this is not an unrealistic expectation. Recent earnings seasons have demonstrated that investors are beginning to scrutinize the actual returns companies are generating from their AI investments.
Investors would be wise to prepare, looking for opportunities to enter after a decent decline in AMD’s share price. Despite lingering concerns casting a shadow over the entire AI industry, analysts generally consider AMD stock a strong buy, with a current price target of $288 per share. This represents a nearly 40% upside from the stock’s current price.
