Advanced Micro Devices (AMD): fair value

Fair-value band

The normal range for this name runs from $72 (cheap) to $319 (expensive); it is now priced at $538.

Is Advanced Micro Devices undervalued?

Expensive. Advanced Micro Devices trades at $538, 176% above the fair value this model estimates; the normal range for this name runs from $72 (cheap) to $319 (expensive).

Diligence checklist

6 pass · 4 fail · 1 no data

• PASSCash actually collected from profit, last 12 months: 175%XBRL · AMD gets $1.75 of real cash for every $1 of reported profit which means profits are real and not just numbers on paper. That's a good sign.
• PASSGap between paper profit and real cash: -4.6%XBRL · AMD's "profit on paper" and "cash in the bank" gap is small enough to pass.
• PASSDebt compared to one year of cash earnings: -0.13xXBRL · AMD holds more cash than debt, so there is no leverage question to answer here. A balance sheet in this shape can fund a bad year out of its own pocket instead of asking a lender for permission.
• FAILHow much more it earns on capital than that capital costs: -10.33ppXBRL (dealbreaker) · AMD earns 10.3 points LESS on the capital it employs than that capital costs. Every dollar reinvested here destroys value instead of creating it, which turns growth into a reason to worry rather than a reason to own the business. It has been below its cost of capital for 18 straight quarters, which is 4.5 years. That is capital destruction rather than a cheap stock, and it is where I stop work. The gap is no wider than it was at the start of the window.
• FAILStock sold by executives and directors on the open market, last 6 months: $24.0MEDGAR (dealbreaker) · Grasby Paul Darren sold $18.6M of stock in the last 6 months, outside any pre-planned selling schedule, and $24.0M went out that way in total. My rulebook says more than $5 million of this kind of selling is disqualifying for a "long" position (buying the stock). The full list of open-market sellers: Grasby Paul Darren $18.6M, Denzel Nora $5.5M. A further $248.6M went out under pre-planned 10b5-1 schedules, which I don't count: those sales are set up months ahead and say nothing about what management thinks today. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either. filing ↗
• FAILHow long the CEO has run this company: 4.6 yearsTEXT · AMD's chief executive took the job on February 14, 2022, 4.6 years ago. I want a full cycle at the company, which I take as 5 years, before a management record tells me anything: a short run has not yet been tested by a bad year. filing ↗
• PASSProfit margin held up during the last sales slump: 47.3% vs 47.0% baseXBRL · The last time AMD's revenue fell, its profit margin per unit sold only slipped a little, from about 47.0% to 47.3%. It means AMD isn't being forced to cut prices to keep product moving, which is what a company with a weak competitive position has to do. This is the accounts talking, not the filing: I'm reading the 2 quarters from September 2023 to December 2023, measured against the year going into it, and a shift in what the company sold can imitate pricing power either way.
• FAILNormal profit margin across a full business cycle: FCF margin 20.6% vs 13.7% medianXBRL · AMD is earning a 20.6% cash margin against a long-run average of 13.7%, 50% better than normal. This is what a cycle peak looks like, and paying for peak margins as though they were permanent is the classic way to overpay for a good business. My valuation grows the average instead. Across the window the margin ran between 5.3% in December 2023 and 23.2% in March 2026.
• N/AHow much of the stock trades on an average day: $13,266MMARKET · AMD trades so much volume that this basically isn't a concern. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• PASSShare of revenue from its single biggest customer: 18%TEXT · AMD's February 4, 2026 10-K names a customer at 18% of revenue, in its own words: "One Client and Gaming segment customer accounted for 18 % of consolidated net revenue in fiscal year 2023". That's inside the quarter-of-revenue line where I stop work, but it is worth knowing whose buying decision moves the top line. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. AMD hasn't changed auditors in the last 2 years, so there's no such red flag here.