Buy the Surge in AMD Stock After Striking Partnership with OpenAI?

Joining Broadcom AVGO and Nvidia NVDA, AMD AMD is the latest major chip supplier to strike a multibillion-dollar deal with artificial intelligence pioneer OpenAI.Spiking as much as +7% in today’s trading session, AMD stock has soared over +30% since announcing a strategic partnership with the ChatGPT creator on Monday. Seen as a bold move, OpenAI secured more long-term compute capacity while giving AMD a massive boost in credibility and market share.On the heels of hitting a new 52-week high of $226 a share, investors may be pondering if it’s time to get in on the surge in AMD stock.Remarkably, AMD shares are now up more than +70% year to date to impressively top the broader indexes, along with Broadcom and Nvidia’s returns of roughly +40%.Image Source: Zacks Investment Research OpenAI Partnership OverviewBeginning in the second half of 2026, OpenAI will deploy up to 6 gigawatts of AMD’s Instinct GPUs to power its next-generation AI infrastructure, including future versions of ChatGPT, model training, and inference systems.As one of the largest GPU deployment agreements, AMD issued OpenAI a warrant for up to $160 million shares of its common stock, potentially giving OpenAI a 10% stake in AMD if all milestones are met. The warrant is based on incentives tied to deployment volume and AMD’s stock price targets.AMD expects the deal to generate tens of billions of dollars in revenue over the next five years, positioning itself as a serious contender in the AI data center GPU market as OpenAI diversifies its supply chain away from Nvidia. Tracking AMD’s OutlookWith the OpenAI partnership likely to significantly boost AMD’s outlook, the chipmaker's total sales are currently expected to surge 27% in fiscal 2025 to $32.81 billion, up from $25.79 billion last year. Plus, FY26 sales are projected to spike another 19% to $39.1 billion.On the bottom line, AMD’s annual earnings are slated to rise 19% in FY25 and are projected to soar another 50% in FY26 to $5.90 per share.Image Source: Zacks Investment Research AMD Valuation ComparisonAmid the rally, AMD stock is now trading at 51.6X forward earnings, commanding a sharper premium to the broader market than Nvidia and Broadcom at 41.6X and 49.8X, respectively.However, AMD does trade at a much more reasonable price-to-forward-sales multiple compared to other high-growth tech stocks at 10.1X, with Nvidia and Broadcom trading over 25X.Image Source: Zacks Investment Research AMD Price Target & Analyst UpgradesAs you can imagine, multiple Wall Street analysts have raised their price targets for AMD stock following its partnership announcement with OpenAI. In fact, several major firms have upgraded their ratings and boosted their price targets to new street-highs of $300, including Jeffries and Barclays BCS. This comes as AMD stock has blown past its current Average Zacks Price Target of $188.53.Image Source: Zacks Investment Research Bottom LineFor now, AMD stock lands a Zacks Rank #3 (Hold). That said, a buy rating could be on the way if there is a compelling trend of positive earnings estimate revisions (EPS) in correlation with the massive GPU deal with OpenAI. Aforementioned, this has officially positioned AMD as one of the most relevant players in the AI ecosystem, redefining the company as a very viable long-term investment.   5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report Barclays PLC (BCS): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks