AMD Stock: A Once-in-a-Decade Opportunity for 348% Growth

It's not often you find a stock that could increase in value by 348% in a five-year time frame. However, that's entirely possible with the growth that AMD (AMD +1.79%) believes it can deliver. If its projections pan out, then AMD is truly a once-in-a-decade investing opportunity right now, as these projections don't appear very often. AMD already had a strong 2025, rising 77%. However, there is plenty of room for more if management is to be believed. AMD is looking to regain ground in the AI arms race AMD has always been seen as an alternative option. In the early 2000s, Intel allowed it to exist in the processor realm so that it wasn't accused of running a monopoly. The same could be said about its battle with Nvidia in the graphics processing units (GPUs) landscape. Nvidia's products are far better in the gaming and artificial intelligence (AI) computing world, and AMD was only viewed as an alternative, so Nvidia didn't have unlimited pricing power. However, AMD is looking to change that narrative. The company believes it's made critical improvements to their lineup to be competitive in the AI computing front. Furthermore, there's a general supply chain crunch that could cause users to pivot to all available options, including AMD's products. With AMD's products being generally cheaper than Nvidia's, this may get them to realize that AMD's products are actually a viable option, rather than just a second-rate alternative. The ball is in AMD's court to prove its viability, and if it works out, management believes there is huge upside. NASDAQ : AMD Advanced Micro Devices Today's Change ( 1.79 %) $ 4.08 Current Price $ 232.00 Key Data Points Market Cap $377B Day's Range $ 228.90 - $ 234.47 52wk Range $ 76.48 - $ 267.08 Volume 1.6M Avg Vol 42M Gross Margin 44.33 % Through 2030, AMD believes that it can grow its data center revenue at a 60% or greater compounded annual growth rate (CAGR). That's incredible growth, and places it on par with the growth levels Nvidia has put up recently. However, AMD isn't all data center products like Nvidia has become. Its client and gaming business is a much larger part of its overall business model than Nvidia's, so understanding how its segment will perform is key. There's also the embedded processor segment AMD has thanks to its Xilinx acquisition. Each of these segments is expected to grow at a 10% CAGR over the same time frame, which is far slower than the data center business. Overall, AMD expects a 35% CAGR for the next five years. If AMD's stock is directly correlated to its revenue growth, that indicates the stock will rise 348% over the next five years. That will take AMD's stock price to nearly $1,000 per share. But is that a realistic projection? AMD's valuation is already elevated I'll give management the benefit of the doubt regarding its growth projections. They have far more information dating out into the future than I have access to, so I'm not going to doubt their estimates. One assumption I made that I will question is whether AMD's stock price growth will directly correlate to its revenue growth. AMD's forward earnings valuation isn't cheap, at 33 times. This indicates significant growth has already been priced into the stock. A valuation like that could limit upside potential, but there's also another catalyst investors should take into account: margin expansion. AMD has a lot of room for improvement on its margins. While it has a gross margin of 44%, rival Nvidia's is 70%. Likewise, Nvidia's profit margin is a jaw-dropping 53%, while AMD's is 10%. I don't think AMD will ever catch Nvidia's profit margins. Still, if it could increase its gross margin by 10 percentage points and translate directly to the bottom line and double its profit margins, AMD's stock could be slated for even greater gains than 348%, as it would have the dual action of margin expansion and growth, pushing the stock higher. I'm not sure how this will play out over the next five years, but I am confident that AMD will be a market-crushing stock, and a great one to own.