AMD (AMD -2.03%) had an incredible 2026. After notable gains earlier this year and another spike that began in early September, the stock is up more than 180% year to date.
However, 2026 is already three-quarters over and investors are starting to look toward 2027. I think history has a lot to say about what AMD investors can expect in 2027. Spoiler: It’s not good.
Image source: The Motley Fool.
It’s difficult to achieve good performances two years in a row
After nearly tripling its market capitalization so far this year, AMD is now a nearly trillion-dollar company. If it were to triple again, it would be worth around $3 trillion and would rank fifth in the world (assuming the value of other megacaps remains stable). However, I don’t think this will happen.
If you look at AMD as a whole and take into account valuation, stock price performance, and business results, there is one thing that stands out: valuation. AMD’s valuation has completely spiraled out of control given the growth it generates. Its forward price-to-earnings ratio has soared to more than 85. That ranks it among the most expensive stocks on the market, and far more expensive than its chipmaking peers.
AMD PE Ratio (Forward) data by YCharts.
Take the industry leader Nvidia (NVDA -0.52%)for example: it trades at just 26 times forward earnings. Broadcom (AVGO +0.39%)which makes custom AI chips, trades at 32 times forward earnings.
In each of their most recent quarters, these chipmakers’ revenues grew faster than AMD’s.
NVDA revenue data (quarterly year-over-year growth) by YCharts. YOY = year after year.
So why is the market giving AMD such a large premium? I think this reflects the fact that investors want something different from Nvidia. Nvidia has long dominated the discussion around AI and the data center accelerator space, and there has been a bit of investment fatigue with the stock. Investors were looking for alternatives and found AMD. This helped spark a major rally through 2026 that left the stock incredibly expensive.
I’m not saying AMD stock will crash in 2027. However, I do think there could be some dips toward the end of the year as investors take profits and reposition into stocks like Nvidia and Broadcom, which are generating better growth in the same chip sector at much lower valuations. It will take a long time for AMD’s business to reach its current high valuation, which will hurt future returns.
Today’s change
(-2.03%) $-12.58
Current price
$608.10
Key Data Points
Daily scope
$606.00 -$627.37
52 week range
$188.22 -$658.52
Volume
13.7 million
Average flight
23.1 million
Gross margin
50.37%
Stock rebounds on usage, not new transactions
Perhaps one of the biggest mistakes that has driven AMD’s stock higher is the correlation between usage and success.
In 2025, AMD announced several deals with AI hyperscalers to supply them with hardware. It then did as planned and delivered computing units to OpenAI and Metaplatforms. These processors are currently being deployed and enjoying great popularity as compute sources for products like Meta Muse. However, all of that growth had already been factored into AMD’s valuation before the start of 2026. The stock’s recent rally was driven by investors interested in the actual usage of AMD’s chips, but it doesn’t make much sense for a stock to benefit from the same sales deals twice.
The chipmaker could do more such deals, but the value of those may have already been priced into the stock at this point. This could spell trouble for AMD’s stock in 2027, and I think the story is pretty clear on what usually happens to a stock when it enters the year with a high valuation: it either drops to a reasonable valuation, or it stays flat as the company rises toward its valuation. Neither option would be ideal for shareholders, which is why I think investors should find another AI stock to invest in for 2027.
Gn bussni
