Advanced Micro Devices (AMD) stock has risen by 62.8% over the course of 21 trading days. The gains are driven in part by the company’s major deal with ChatGPT maker OpenAI, to supply tens of thousands of its GPU chips for 6 gigawatts of computing capacity over the next five years.
AMD logo displayed on a phone screen and a laptop keyboard are seen in this illustration photo taken in Krakow, Poland on October 30, 2021. (Photo by Jakub Porzycki/NurPhoto via Getty Images)
NurPhoto via Getty Images
However, the stock now appears expensive, leading to the question – what is the risk? Could it decline sharply? Consider the following information:
- Size: Advanced Micro Devices is a $421 Billion company with $30 Billion in revenue, currently trading at $259.67.
- Fundamentals: Revenue growth over the last 12 months has been 27.2%, with an operating margin of 8.3%.
- Liquidity: The company has a Debt to Equity ratio of 0.01 and a Cash to Assets ratio of 0.08.
- Valuation: Advanced Micro Devices stock is presently trading at a P/E multiple of 148.7 and a P/EBIT multiple of 170.1.
- It has historically returned (median) 17.4% within a year following significant declines since 2010. See AMD Dip Buy Analysis.
While we prefer to take advantage of momentum if the fundamentals are solid – for AMD, see Buy or Sell AMD Stock – we remain cautious about potential bull traps. Particularly, it is important to consider if the situation worsens, and AMD falls 20-30% to approximately $182, will we be able to retain our shares? What could the worst-case scenario be? We refer to this concept as downturn resilience. Interestingly, the stock has performed worse than the S&P 500 index during different economic downturns. Our evaluation is based on (a) the extent of the stock’s decline and (b) the speed of its recovery.
Investing in a single stock can be risky; however, there is significant value in a wider, diversified strategy. Strategic asset allocation and diversification facilitate ongoing investment. Did you know that investors who panicked and exited the S&P in 2020 missed out on significant subsequent gains? Trefis High Quality Portfolio and Empirical Asset Management’s asset allocation strategy are developed to mitigate volatility, allowing you to stay the course.
Below are the specifics; however, as a brief background: AMD develops x86 microprocessors, accelerated processing units, chipsets, discrete and integrated GPUs, data center and professional GPUs, as well as development services across computing, graphics, enterprise, embedded, and semi-custom sectors.
2022 Inflation Shock
- AMD’s stock declined 65.4% from a peak of $161.91 on 29 November 2021 to $55.94 on 14 October 2022, compared to a peak-to-trough drop of 25.4% for the S&P 500.
- Nonetheless, the stock fully recovered to its pre-Crisis peak by 18 January 2024.
- Since then, it rose to a high of $259.67 on 27 October 2025.
2020 Covid Pandemic
- AMD’s stock decreased 34.3% from a peak of $58.90 on 19 February 2020 to $38.71 on 16 March 2020, in contrast to a peak-to-trough reduction of 33.9% for the S&P 500.
- Nonetheless, the stock returned to its pre-Crisis peak by 22 July 2020.
2018 Correction
- AMD’s stock experienced a decline of 49.1% from a high of $32.72 on 14 September 2018 to $16.65 on 24 December 2018, compared to a peak-to-trough dip of 19.8% for the S&P 500.
- Nevertheless, the stock fully recovered to its pre-Crisis peak by 10 June 2019.
2008 Global Financial Crisis
- AMD’s stock plunged 91.2% from a peak of $20.35 on 1 January 2007 to $1.80 on 25 November 2008, compared to a peak-to-trough fall of 56.8% for the S&P 500.
- Nonetheless, the stock fully recovered to its pre-Crisis peak by 21 August 2018.
It is essential to keep in mind how low AMD might drop during a downturn. Furthermore, you should examine the stock’s performance in comparison to the Trefis High Quality (HQ) Portfolio, which comprises a selection of 30 stocks, demonstrating a record of comfortably outperforming its benchmark that includes all three indices – the S&P 500, S&P mid-cap, and Russell 2000. What is the reason? Collectively, HQ Portfolio stocks yielded superior returns with lower risk compared to the benchmark index; presenting less of a volatile experience, as shown in HQ Portfolio performance metrics.