AMD Stock: 80% Growth in 2027 Makes It a Buy

Advanced Micro Devices (AMD) has significantly raised its growth expectations for 2027, following a surge in data center revenue. In the third quarter, AMD's data center revenue jumped 97% year over year, driven by strong demand for its server chips and AI accelerators.

At its analyst day in November 2025, AMD had set a goal to grow revenue by more than 35% annually and earn over $20 per share within three to five years. By August 2026, CEO Lisa Su noted the company was tracking "materially ahead" of that plan. Now, after another strong quarter, management expects revenue to grow more than 80% in 2027, with server chip revenue doubling and data center AI revenue becoming over 80% of total revenue next year.

Higher data center sales are also expected to boost margins. CFO Jean Hu anticipates operating expenses to grow at less than half the rate of revenue next year, leading to "very significant" margin expansion.

The main risk is not a slowdown in AI spending but whether AMD can meet demand. Su acknowledged that demand exceeds supply, so if AMD can't build chips fast enough, 2027 growth could fall short. However, this is a high-class problem—too many customers, not too few.

At around $487 per share, AMD trades at roughly 30 times consensus 2027 earnings and 20.5 times 2028 estimates of $23.56. That's a reasonable valuation for a company with such strong momentum, making the stock a buy ahead of potential new highs in 2027.

The raised guidance is a game-changer for AMD. It signals that the company is not just participating in the AI boom but is becoming a dominant player. Data center AI revenue becoming over 80% of total revenue next year means AMD is transforming into an AI-first company, which could command a higher valuation multiple.

The margin expansion story is equally important. With operating expenses growing at less than half the rate of revenue, AMD's profitability is set to improve significantly. This operating leverage can lead to earnings growth that outpaces revenue growth, a key driver of stock price appreciation.

Valuation-wise, AMD's current price of $487 may seem high, but when you consider the growth trajectory, it's actually reasonable. At 20.5 times 2028 earnings, AMD is not priced for perfection. If the company delivers on its 2027 guidance, the stock could see substantial upside.

The supply constraint is a double-edged sword. On one hand, it shows strong demand; on the other, it limits near-term revenue. However, as AMD ramps up production, this should resolve, and the growth story remains intact. Investors should monitor supply chain updates closely.

Overall, AMD's momentum is a positive signal for the entire AI semiconductor sector. It validates the growing demand for AI infrastructure and positions AMD as a key beneficiary.