Advanced Micro Devices has soared over the past year amid excitement over its central-processing units. But the stock might be due for a pause, according to analysts at William Blair.

AMD shares were up 1.6% at $526.07 in Thursday's premarket, adding to a 259% gain over the past 12 months through to Wednesday's close.

That's a rise which has William Blair analyst Sebastien Naji wary of the stock, which he initiated with a Market Perform. He notes AMD now trades at a price-to-earnings multiple of 33 times his forecast for the chip company's 2027 earnings and gives a fair-value estimate of $565 a share.

"AMD's 146% surge since April, versus 58% for the SOX [PHLX Semiconductor Index], has left the shares priced at a premium to peers with little room for error," Naji wrote. "While in a broader sense we acknowledge that it is difficult to get overly negative about the prospects of a semiconductor and AI computing supplier in the midst of a chip supercycle, we believe it may take time for this stock to digest its recent run-up in valuation."

The motor for AMD's rise has been surging demand for its CPUs to power artificial-intelligence workloads, especially those carried out by agents -- AI acting autonomously. But Naji warns that competing CPUs from all of Arm, Qualcomm and Nvidia could limit that growth in future, as well as AMD's traditional rival Intel, meaning an "era of easy CPU share gains" is coming to an end.

"Intel is likely to regain its competitiveness in the server CPU market in the next 1-2 years -- we believe the release of Coral Rapids in 2028 could mark that milestone," Naji wrote.

That doesn't mean AMD's share gains will immediately come to an end -- it could achieve its target of more than 50% in server CPUs well within its 3-5 year time target, according to the Wlliam Blair analyst. However, things are set to get tougher from there.

Meanwhile, AMD still faces an uphill battle to take market share in graphics processing units from leader Nvidia, which sets itself apart due to software and its broader product portfolio, while AMD's sales could also be limited by the growth of custom AI chips, according to Naji.

"As we move into 2027 with an eye to growth deceleration in 2028 and beyond, shares are likely to re-derate (like we have seen with peers Nvidia and Broadcom)," Naji wrote.

Write to Adam Clark at adam.clark@barrons.com

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July 09, 2026 08:26 ET (12:26 GMT)

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