Why AMD Matters
The semiconductor world just witnessed one of the most significant partnerships of 2025. Advanced Micro Devices (AMD) announced a game-changing deal with OpenAI that sent shockwaves through Wall Street, causing the stock to surge over 25% in a single day. Whether you're a tech investor or just getting started, understanding what happened here—and what it means for your portfolio—has never been more important.
About AMD (Advanced Micro Devices)
AMD is a semiconductor company that designs and manufactures computer processors (CPUs) and graphics chips (GPUs). Think of them as the company that makes the "brains" powering everything from your gaming PC to massive data centers running artificial intelligence. For years, they competed with Intel in processors and Nvidia in graphics chips. Now, they're making a major play to become a leader in AI computing.
Stock at a Glance
Sector: Semiconductors/Technology
Market Cap: $381 Billion
52-Week Range: $90 - $235
Current Price: ~$230 (as of October 2025)
What Bulls Are Excited About
1. Jeremy Lefebvre (Jeremy Lefebvre Clips) - EXTREMELY BULLISH
Price Target: $700-$1,000 by 2029
Jeremy calls this OpenAI partnership a "massive moment that changed everything forever." He's excited because:
The deal could bring AMD $20-90 billion in revenue from just ONE customer
OpenAI is highly motivated to buy AMD chips because they get stock warrants that become more valuable as AMD's stock price rises
Big Tech companies (Google, Microsoft, Meta) want AMD to succeed to reduce Nvidia's pricing power
AMD's revenue growth could outpace Nvidia's over the next several years
2. Alex (Ticker Symbol: YOU) - VERY BULLISH
Opinion: "Great stock to get rich without getting lucky"
Alex was previously wrong about AMD but now sees massive validation:
The 6 GW deal represents over 20 YEARS of AMD's current annual GPU sales
Could more than double AMD's entire data center GPU business
OpenAI believing AMD can reach a $1 trillion valuation (stock at $600) is huge validation
In a booming AI market, there's room for both Nvidia AND AMD to win
3. Jose Najarro (Jose Najarro Stocks) - "EXTREMELY EXTREMELY BULLISH"
Opinion: Path to trillion dollars now "a lot smoother"
Jose is thrilled because:
This deal builds crucial supply chain trust—manufacturers will now invest in AMD production lines
Major Wall Street analysts raised price targets: TD Cowen to $270, Wells Fargo to $275, Goldman Sachs to $210
AMD's GPUs are showing excellent performance per dollar against Nvidia
Recent benchmarks show AMD beating Nvidia H100 in some tests
4. The Patient Investor - BULLISH
Updated Price Target: $500 per share (5-year target)
Calls AMD "Advanced Money Dispenser" because:
Partnership could contribute over $100 billion in new revenue over four years
AMD is optimizing chips for "inferencing" (running AI models)—a major long-term trend
Current valuation is "extremely undervalued" with forward P/E of 41x versus 54% expected earnings growth
That means PEG ratio under 1.0—typically signals undervaluation
5. Alpha Mantra - BUY RATING
Opinion: AMD can break Nvidia's monopoly like it broke Intel's
History repeating itself:
AMD grew from 10% CPU market share to 41% server CPU share by competing with Intel
Now positioned to do the same in GPUs against Nvidia
Major customers want alternatives to Nvidia to reduce supply chain risk
AMD's open-source software (ROCm) versus Nvidia's proprietary CUDA could win over big buyers
6. Bram de Haas - STRONG BUY
Opinion: "Bad deal" (because of warrants) actually makes it a strong buy
His logic:
Yes, AMD gave away potential 10% of company through warrants
BUT this locks in OpenAI as a massive long-term customer
Deal could add $20 billion in annual revenue once fully ramped (2027)
That's 166% growth in the data center segment in first year
OpenAI has strong incentive to make AMD succeed because of their warrants
7. Johnny Zhang, CFA - BUY RATING
Opinion: "Still buying after massive rally"
Why he's not worried about the price jump:
Forward P/E of 42x not extreme given growth outlook
Deal is "highly accretive" to earnings per share
Current valuation doesn't reflect 2026+ growth from OpenAI deal
In line with Nvidia's 41x P/E, but AMD has higher growth potential
What Bears Are Concerned About
1. Juxtaposed Ideas - HOLD RATING
Concerns: Rally too fast, dilution risks, AI bubble forming
Why the caution:
AMD effectively gave away 10% of the company—that's massive dilution
Stock jumped 43% while market only up 4%—too much too fast
AI mania reached "fever pitch"—depends on OpenAI maintaining $500B valuation
OpenAI burning $8 billion in 2025, $115 billion by 2029—can they afford this?
Stock trading at 54x forward P/E versus 5-year mean of 38.73x—extended valuation
RSI showing "notably overbought levels"
Warning: "Do not chase this rally over the cliff"
2. Mark Hibben - HOLD RATING
Major Concern: AMD lacks crucial technology for the deal
The technical problem:
AMD needs "Ultra Accelerator Link" (UALink) technology to connect multiple GPUs
Nvidia already on 3rd generation of similar tech (NVLink Switch)
AMD's UALink consortium only formed a year ago—no working hardware yet
Has just one year to deliver competitive product
If AMD can't deliver working UALink by 2026, OpenAI deal could fall apart
OpenAI can walk away if AMD's solution underperforms—they just lose the warrants
"Failure to develop acceptable UALink would likely doom the partnership"
3. Tech Stock Pros - CAUTIOUS
Warning: Don't hold through earnings, pullback likely
Short-term risks:
Stock up 40% in 5 days—unsustainable pace
RSI at 81 (anything over 70 is overbought)
Benefits won't show up in financials until 2H 2026—three quarters away
Gross margins under pressure (contracted to 43.3% last quarter)
Competition from Intel (partnering with Nvidia) threatens AMD's CPU business
Historical pattern: AMD stock often drops after earnings reports
Recommendation: Take profits now, buy back on dip
4. The Sharpe Quest - "LONG-TERM BULLISH, SHORT-TERM CAUTIOUS"
Concern: Pullback to $180-$190 likely
Technical and valuation worries:
After gap up, price typically revisits $180-190 zone before continuing higher
High growth expectations already priced in at current levels
Any earnings miss or execution delay could compress the valuation multiple
Forward P/E of 50x demanding—requires hitting all targets
Suggests taking profits now and re-entering around $180 for better risk-reward
Core Thesis and Understanding
What Actually Happened (Simple Explanation):
Imagine you run a lemonade stand and the biggest restaurant chain in town (OpenAI) just agreed to buy lemons from you for the next 5 years. To sweeten the deal, you offered them a 10% ownership stake in your lemonade stand—but only if they buy enough lemons AND your lemonade stand becomes super successful.
That's essentially what AMD did. They secured a massive customer, but gave away potential ownership to make it happen.
The Bull Case (Why People Are Excited):
AMD just landed one of the biggest customers in AI (OpenAI)
This deal could bring $20-100 billion in revenue over several years
Big tech companies WANT AMD to succeed (to compete with Nvidia)
AMD's chips are getting competitive in performance
Open-source software approach could win over major customers
The Bear Case (Why People Are Worried):
Giving away 10% of the company is expensive (dilutes existing shareholders)
Stock price jumped too far, too fast
AMD lacks some key technology (UALink) needed to deliver
Won't see financial benefits until late 2026
AI spending boom might not last
OpenAI itself is burning massive cash—can they afford this?
Takeaways for Retail Investors
If you're considering buying AMD:
GOOD REASONS TO BUY:
Long-term (3-5 year) growth story is compelling
Major validation from OpenAI partnership
Multiple analyst upgrades with price targets $210-$275
Still room to grow if AI boom continues
Historical track record of beating Intel in CPUs
REASONS TO BE CAUTIOUS:
Stock just had massive rally—could pull back 10-20%
Benefits won't show up in earnings for 3+ quarters
Technical indicators extremely overbought
Execution risks (UALink technology, supply chain)
Expensive valuation—you're paying for future growth
Smart Approach:
Don't chase the current price
Wait for a pullback to $180-190 range for better entry
If you already own it, consider taking some profits
Think 3-5 years, not 3-5 months
Only invest money you can afford to hold through volatility
Bottom Line: AMD made a bold move that could pay off big in 2-3 years, but the stock got ahead of itself in the short term. Patience will likely be rewarded.
The Bottom Line
AMD just made one of the most aggressive plays in semiconductor history. By partnering with OpenAI and offering them a potential 10% stake, AMD secured a massive customer but at a significant cost. The market's initial reaction was euphoric—sending the stock up over 25%.
However, the real story will unfold over the next 2-3 years. Bulls see AMD finally breaking into Nvidia's AI dominance, potentially replicating how they took market share from Intel in CPUs. Bears worry about execution risks, expensive dilution, and whether the AI spending boom is sustainable.
For retail investors, the key is patience. The opportunity is real, but timing matters. Don't chase the rally. Wait for a better entry point, and remember: in investing, what you pay matters just as much as what you buy.