Where Will AMD Be in 2028?

Advanced Micro Devices (NASDAQ: AMD) has delivered strong returns this year, but unless you've held over the past 10 months, you haven't gained anything. The bigger risk lies in what's ahead for AMD, as that will determine future returns.

AMD has to continue proving itself to the market quarter after quarter, as there is a lot of skepticism about its positioning compared to other industry giants. By 2028, I think this will be clear, but where will the stock be? I think it will be in the exact same spot. Here's why.

AMD's growth has already been pulled ahead

For most of AMD's life, it has always been viewed as an alternative product line, rather than the industry standard. This has hurt it on more than one occasion, and the AI build-out is no different. Nvidia is seen as the industry standard, with AMD as a solid alternative. But it's not the first choice.

However, AMD's products are starting to be used in more applications, and this has caused its data center revenue growth rate to spike. In Q2, its data center revenue rose 107% year over year, so clearly it's starting to become a more popular choice. AMD will need to continue that performance for the foreseeable future, as there is a ton of growth already priced into the stock.

Currently, AMD's shares trade at a very expensive 136 times trailing earnings. To make matters worse, it was over 160 just a few days ago.

AMD PE Ratio data by YCharts

That's a very optimistic price tag, and it indicates there is a lot of expected growth that has been pulled forward. If you value the stock based on 2027 earnings, this is confirmed.

AMD PE Ratio (Forward 1y) data by YCharts

AMD's stock trades for 33.5 times next year's earnings, not this year's. That's a huge premium, and I think it's a bit absurd. For comparison, the industry standard is Nvidia. It trades at 27 times earnings right now. So, there is well over a year and a half worth of growth already priced into the stock.

By the beginning of 2028, I think AMD's stock will not have budged much. It needs to go through a year or so of lackluster stock growth so that business results can catch up to the stock price. The stock is well in front of the business right now, which can cause poor future returns. If you're sitting on big AMD gains, now may be the time to sell and find a different stock. If you haven't bought any, now probably isn't the best time to get in.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.