Advanced Micro Devices (AMD 0.85%) supplies some of the world's best semiconductors, including a growing portfolio of chips specifically designed to handle artificial intelligence (AI) workloads in data centers and personal computers.

AMD is scheduled to report its financial results for the first quarter of 2025 on May 6. Investors can expect to learn more about the company's progress, and perhaps even receive an updated forecast from CEO Lisa Su regarding AI chip sales for 2025.

The stock is currently trading 54% below its record high from 2024. Some of that downside occurred after April 2, when President Donald Trump imposed sweeping tariffs on America's trading partners. The stock is now at a very attractive valuation, so is this a good opportunity for investors to buy ahead of the May 6 report?

Image source: Getty Images.

Catching up to Nvidia in the data center

AMD launched its MI300X AI graphics processing unit (GPU) for the data center in late 2023. It quickly won over several top AI developers like Meta Platforms, Microsoft, and Oracle, some of which yielded better performance and lower costs compared to using Nvidia's H100 (which was leading the industry at the time).

AMD has since launched the more powerful MI325X, and it's gearing up to start shipping a brand new lineup called the MI350 series, which is based on a fresh GPU architecture called CDNA (Compute DNA) 4. This architecture offers an eye-popping performance increase of 35 times compared to CDNA 3 chips like the MI300X. It will rival Nvidia's Blackwell architecture, which is currently the benchmark for the industry.

The company started sending MI350 samples to customers during the first quarter of 2025, with production expected to ramp up into the middle of the year. It's likely to be AMD's most popular lineup of data center GPUs so far, because their increased processing power could pave the way for some of the most advanced AI models developed to date. In fact, Oracle recently announced plans to build a cluster of 30,000 of the upcoming MI355X GPUs, which might be a sign of things to come from other customers.

Investors are likely to receive an update on the production and demand picture when AMD reports its first-quarter financial results on May 6.

AMD's data center segment carried serious momentum into 2025

AMD generated $25.8 billion in total revenue during 2024, which was a 14% increase from the prior year. However, the company's data center revenue soared by 94% to reach a record high of $12.6 billion.

GPU sales alone accounted for $5 billion of that total, and Su predicts that this figure will scale into the tens of billions of dollars over the next few years. Investors should keep an eye out for an update on that forecast on May 6, especially now that many customers have sampled the MI350 series GPUs over the last few months.

AMD also generated $7 billion in revenue in its client segment, which was a 52% year-over-year jump. This business unit is home to the company's Ryzen AI chips for personal computers, which enable powerful chatbots and other AI applications to run locally on-device. This creates a much faster user experience, and it means you can use the power of AI without an internet connection in some cases.

The chipmaker's other two segments, gaming and embedded, didn't fare so well during 2024, which is partly why its stock has lost so much ground. Gaming revenue declined by 58%, but a recovery might be underway. The company recently released the hotly anticipated Radeon 9070 GPU, which many customers were waiting to buy. Revenue from the embedded segment, on the other hand, sank by 33% due to weak demand in primary markets like communications and industrials.

Simply put, if AMD can return the gaming and embedded segments to growth in 2025 (as is expected), while continuing to deliver powerful growth in its AI businesses, the company could be in for a record year in 2025.

Image source: Advanced Micro Devices.

AMD stock is cheap, but tariffs create uncertainty

Like Nvidia and many other industry heavyweights, AMD relies on Taiwan Semiconductor Manufacturing to fabricate a significant portion of its chips. Earlier this month, President Trump imposed a 10% tariff on all goods imported into the U.S., in addition to another "reciprocal" tariff of 32% on Taiwan specifically (which was recently paused for 90 days). The president exempted semiconductors from these penalties, but they will still affect many of AMD's customers, which could force them to reduce their AI infrastructure budgets.

As a result, it's possible that Su will not increase her 2025 sales forecast for GPUs when AMD reports its first-quarter results on May 6, which is a key risk to the stock.

Nevertheless, President Trump has pulled this policy lever before. He imposed a series of tariffs on America's trading partners in 2018, which contributed to a near-20% decline in the S&P 500. But as we now know, the market -- and the broader economy -- recovered just fine in the years that followed.

On that note, it might be a good idea to set May 6 aside and focus on AMD's long-term potential, especially given its current stock price. It trades at a price-to-earnings (P/E) ratio of 28.2, which is a 31% discount to Nvidia's P/E ratio of 37.1.

Moreover, based on Wall Street's average earnings-per-share forecast of $4.65 for 2025 (provided by Yahoo! Finance), AMD stock trades at a forward P/E ratio of just 20.1. In other words, the stock would have to climb by 40% by the end of this year just to maintain its current P/E ratio.

There could be some volatility surrounding AMD's upcoming financial report on May 6, depending on what Su tells investors about AI demand. However, investors could do well if they buy the stock at the current price regardless, as long as they can maintain a long-term horizon of three to five years.