Advanced Micro Devices stock jumped 6% by 11:10 a.m. ET Thursday following the release of quarterly earnings from its manufacturing partner Taiwan Semiconductor Manufacturing Company. TSMC reported $2.98 per share on sales of $32.7 billion for the fourth quarter of 2025, exceeding analyst expectations.
AMD projected continued strong demand for its advanced process technologies in the first quarter of 2026. Analyst Aaron Rakers from Wells Fargo upgraded AMD stock to his "top pick" on Thursday morning.
"We see significant upside potential" in AMD shares, Rakers stated. He predicted a 55% rise this year, citing ongoing CPU leadership and market share gains, along with strengthening AI positioning through its data center GPU portfolio.
Rakers projected AMD would earn $20 per share by 2029, a substantial increase from the $1.90 per share earned over the past twelve months. He described data center compute demand for AI chips as "insatiable."
AMD shares currently trade at more than 117 times trailing earnings. With a long-term forecast growth rate of 44%, this results in a PEG ratio exceeding 2.6.
The company generated $5.4 billion in free cash flow over the last year. This means for every $1 reported in earnings, AMD produced about $1.64 in real cash profit. By this measure, the stock's valuation falls to 67 times free cash flow, yielding a price-to-free cash flow ratio of 1.5.
The Motley Fool Stock Advisor analyst team recently identified ten stocks they consider the best for investors to buy now. Advanced Micro Devices was not included in that list. The selected ten stocks are projected to deliver substantial returns in coming years.
Stock Advisor's total average return is 955%, significantly outperforming the S&P 500's 196% return. The service highlights past successes like Netflix and Nvidia, which generated massive returns for investors following earlier recommendations.