With demand for artificial intelligence (AI) accelerator chips from data centres skyrocketing, a lot of investors have been considering Advanced Micro Devices (NASDAQ:AMD) stock for their portfolios. Compared to Nvidia, AMD (as it’s known) hasn’t delivered explosive returns over the last five years.

Yet the share price has still more than doubled since 2020. And with data centre customers looking for cheaper Nvidia-alternative products, AMD could be getting in a prime position to surge in the future.

With that in mind, let’s explore what the experts are saying and estimate how much a £5,000 investment could grow over the next 12 months.

Battling with competitors

Today, Nvidia continues to dominate the AI chip space among data centre customers. However, despite being a bit slow to capitalise on the AI spending tailwinds, AMD has begun producing increasingly powerful chips to start taking market share back.

The group’s MI300X GPU, launched in December 2023, has started closing the performance gap between AMD and Nvidia, outperforming the latter’s H100 AI GPU at around half the cost.

Nvidia has since released newer chips that once again have taken the crown in terms of performance with its B100 and the soon-to-be-released B200. And when combined with its CUDA software platform, Nvidia still holds a significant competitive advantage over its rival. But AMD certainly appears to be making progress in offering lower cost alternatives for data centres.

Intel has also started feeling pressure from AMD in the central processing unit (CPU) market as well. In the first quarter of 2025, Intel’s CPU market share shrank from 79.2% to 75.6%, while AMD’s increased from 20.8% to 24.4%. And looking at the new Ryzen AI Pro 300 processor series it offers significantly greater AI performance versus Intel’s competing Core Ultra series.

Time to consider buying?

At a forward price-to-earnings ratio of 28, AMD shares aren’t outrageously expensive, considering its latest results showed a 36% jump in sales paired with a 57% boost to underlying operating income. And if it can continue to make technological strides as a cheaper Nvidia and Intel alternative, this growth could accelerate even further.

With that in mind, it’s not so surprising to see bullish sentiment from institutional investors, with Hans Mosesmann from Rosenblatt Securities placing a $200 price target for AMD stock. Compared to where the shares are currently trading today, that suggests investors might be able to reap a 76% return over the next 12 months, transforming a £5,000 investment into £8,810.

However, as exciting as that prospect sounds, it’s important to note that other analysts aren’t as bullish. Its competitors aren’t going to sit idle while AMD’s R&D team play catch up. And the company could struggle to retain critical talent if Nvidia decides to start poaching with alluring compensation packages and stock options.

Even if that doesn’t happen, the business is also reliant on several key clients. For example, in 2024, 40% of sales came from just two customers. Should the relationship with these clients break down in the future, growth could become a significant challenge.

Overall, I think Mosesmann might be a bit too optimistic with his AMD price target. But the company definitely seems to offer a potentially compelling opportunity in the long run. Therefore, investors may want to consider digging deeper.