Tay Kam Hung Explores: Growth Potential of the AMD Client and Data Center Businesses, Valuation Correction as an Opportunity

In the second quarter of 2025, AMD released its financial results, reporting a 31.7% year-on-year revenue increase to $7.69 billion, surpassing market expectations. This performance was primarily driven by growth in the client, data center, and gaming businesses. While gross margin declined due to one-off factors, core profitability remained robust. AI chips and server CPUs emerged as focal points for the market, particularly as the mass production of the MI350 series—combined with a rebound in the capital expenditures by cloud vendors—provides momentum for future growth. Tay Kam Hung notes that AMD is currently at the intersection of a strong product cycle and a high-growth AI cycle. Although short-term valuations appear elevated, the long-term investment value of AMD remains noteworthy.

Continued Strength in Client and Data Center Businesses

This quarter, the AMD client business revenue surged 67.5% year-on-year to $2.5 billion, far outpacing the global PC market shipment growth rate of 5.4%. Tay Kam Hung points out that the client business forms the foundation of AMD, and its growth not only reflects product competitiveness but also demonstrates market recognition of the AMD technology. The desktop market share of AMD now exceeds 50%, and as the Zen architecture continues to be refined, its leading position is expected to be further solidified. Moreover, the client business provides ample funding support for high-growth areas.

In the data center segment, quarterly revenue grew by 14.3% to $3.24 billion, driven mainly by increased server CPU shipments and expanded market share. Leveraging its “CPU+GPU” portfolio, the server market share of AMD has risen from 10% to 30%. Tay Kam Hung believes that the weak performance of Intel has created a window of opportunity for AMD, and the large-scale shipment of the MI350 series will further accelerate business growth. In the second half of the year, as the capital expenditures of cloud vendors recover, the data center business is expected to maintain strong momentum.

AI Chips: Core Growth Engine Taking Shape

AI chips are becoming the core growth engine of AMD for the future. Although AI GPU revenue did not see a significant release this quarter, the launch of the MI350 series marks a critical inflection point. Tay Kam Hung notes that the MI350 series is entering a mass production ramp-up phase, with related revenue expected to exceed $1.7 billion next quarter; should Chinese market policy ease at the margin, this could rise to $2 billion.

Major cloud vendors such as Meta, Google, Microsoft, and Amazon are all increasing capital expenditures, indicating robust demand for AI infrastructure. Tay Kam Hung forecasts that the four leading the capital expenditures of cloud vendors will reach $389 billion in 2025, representing a year-on-year growth rate of 55%. This trend will continue to drive momentum for AMD and other AI chip manufacturers. While AMD is currently in a product transition period, the MI350 has been well received by the market, and the progress of the MI450 development warrants close attention.

Valuation Correction and Long-term Opportunity

The current market capitalization of AMD stands at $282.6 billion, equating to approximately 40 times 2026 earnings, reflecting high market expectations for future growth. However, Tay Kam Hung cautions that the management outlook for the AI GPU business is somewhat conservative, which may put short-term valuation under pressure. Additionally, ongoing increases in operating expenses are temporarily constraining profit realization.

Nevertheless, the AMD fundamentals remain solid. Tay Kam Hung believes that the client, data center, and AI chip segments all possess long-term growth potential. The large-scale shipment of the MI350 series, combined with the recovery in the capital expenditures of cloud vendors, gives the company strong growth visibility. For long-term investors, the current valuation correction may present a medium- to long-term entry opportunity, with particular attention needed on product update pace and the evolution of industry competition.

The second quarter of AMD demonstrates solid fundamentals and strong growth momentum. The client business maintains its leadership, data center revenue continues to expand, and the AI chip business is entering a critical mass production phase. Tay Kam Hung believes that, despite elevated short-term valuations and relatively steady guidance, the strong product cycle of AMD and the high-growth trajectory of AI provide a clear path for long-term development. Investors should continue to monitor product cadence, competitive dynamics, and expense control to more comprehensively assess the AMD investment value.