AMD Stock: A Warning Ahead of Earnings

AMD's stock is "stretched" ahead of Q2 earnings, with a 14-week RSI value of nearly 75, suggesting a significant pullback is likely. The stock price has doubled since April, and the current valuation is overextended. Management will need to report a strong earnings beat and guidance raise to sustain the current valuation. Forward P/E ratio is 45, 11.87% higher than its five-year average.

Title: AMD's Stock Valuation and Q2 Earnings: A Critical Analysis

Advanced Micro Devices (AMD) is poised to release its second-quarter 2025 earnings results on August 5. The company is expected to report revenues of $7.4 billion, with year-over-year growth of approximately 27% [1]. The Zacks Consensus Estimate for AMD’s second-quarter revenues is pegged at $7.41 billion, indicating a year-over-year growth of 26.96% [1]. Despite these promising expectations, AMD's stock has been trading at a stretched valuation, with a 14-week RSI value of nearly 75, suggesting a significant pullback is likely [2].

AMD's stock price has more than doubled since April, reaching around $179.51 as of the last session [2]. The current forward P/E ratio of 45 is 11.87% higher than its five-year average, indicating an overextended valuation [2]. Management will need to report a strong earnings beat and raise guidance to sustain the current valuation.

AMD's growth is expected to be driven by its data center and client segments. The company anticipates a significant increase in data center revenues, with the Zacks Consensus Estimate for the second-quarter data center segment revenues at $3.31 billion, representing a year-over-year increase of 16.7% [1]. The client and gaming segment is also expected to grow by double-digit percentages, driven by strong desktop performance and continued demand for gaming products [1].

However, AMD faces challenges in the embedded segment, where revenues are expected to remain flat year-over-year [1]. Additionally, the new export controls on MI308 shipments to China are expected to reduce revenues by $700 million in the second quarter of 2025 [1].

Analysts remain divided on AMD's stock. UBS has lifted its 12-month price target to $210 from $150 while maintaining a "Buy" rating, citing growing demand in both PC and data center markets [2]. However, some analysts remain cautious, pointing to stiff competition, macroeconomic uncertainty, and high expectations already priced into the stock [2]. Goldman Sachs, for instance, initiated coverage of AMD with a "Neutral" rating and a $140 price target, cautioning that AMD's server CPU share gains may decelerate due to rising ARM penetration [2].

In conclusion, while AMD's Q2 earnings are expected to be strong, the stock's valuation is overextended. Management will need to deliver a significant earnings beat and raise guidance to justify the current valuation. Investors should closely monitor the earnings report and analyst reactions to assess the stock's potential for a pullback or continued growth.

References
[1] https://www.tradingview.com/news/zacks:6cd2ca20c094b:0-should-you-buy-hold-or-sell-amd-stock-ahead-of-q2-earnings/
[2] https://finance.yahoo.com/news/amd-stock-hit-210-2025-131824088.html