Advanced Micro Devices (NASDAQ: AMD) has rarely appeared in better financial shape, at least on the surface of its latest results.
In its first quarter, the chipmaker posted revenue of $10.3 billion, up 38% from a year earlier, while data center sales surged 57% to $5.8 billion as demand for its EPYC CPUs and Instinct GPUs kept climbing.
The stock saw a massive jump after the report.
But the same earnings call also carried a warning: AMD expects gaming revenue in the second half to fall by more than 20% from the first half, as higher memory and component costs weigh on consumer demand.
AMD flagged the weak spot itself
The bearish case starts with AMD’s own guidance, not an outside analyst’s guess.
CFO Jean Hu said second-half gaming revenue is expected to decline more than 20% versus the first half, and CEO Lisa Su said the company is planning the business accordingly.
The pressure comes from higher memory and component costs, which are hitting consumer electronics and gaming demand more broadly.
AMD’s gaming unit is not the company’s biggest business, but it is the clearest place where the second half could turn softer even if the data center story stays hot.
That matters because the gaming segment, while only a slice of total revenue, is exactly where the slowdown is easiest to see.
AMD reported gaming revenue of $720 million in Q1, up 11% year on year, but still far smaller than its data center engine.
Supply ceiling Wall Street keeps underestimating
The bigger issue is that demand is not the same as shipment capacity.
AMD still relies heavily on TSMC, which means even strong orders do not automatically turn into stronger sales.
HSBC’s May 4 downgrade to Hold leaned on that exact point, saying the recent rally had already lifted expectations too far and that supply-chain uncertainty around the MI450 rack-server ramp was a real constraint.
HSBC also cut its 2026 AI GPU revenue estimate, a sign that the bank thinks the back half may be harder to deliver than bulls expect.
Even some of the bulls are hedging.
Wedbush remained positive on AMD, but it said it had struggled to independently corroborate management’s second-half outlook and that strong CPU demand may end up being the insurance policy if GPU growth arrives more slowly than hoped.
The valuation is already asking a lot
This is where the stock starts to look vulnerable.
HSBC said AMD’s valuation had expanded from about 19 times to nearly 33 times estimated 2027 earnings after the recent rally, which leaves far less room for disappointment.
That is the kind of multiple that assumes the next few quarters go more or less right.
It is also why the stock can fall even after very strong earnings: the bar was already moved high before the numbers came out.
Citi is taking a more cautious stance as it kept a Neutral rating and a $248 price target, using a sum-of-the-parts approach that separates the CPU and GPU businesses rather than assuming one big AI story carries everything.
That is not a bearish call on AMD’s business, but a reminder that the market may be paying up for perfection just as the company is warning about consumer weakness, supply limits, and a back-half GPU ramp that still has to prove itself in volume.
The post Here’s why AMD stock could struggle in the second half of 2026 appeared first on Invezz
