1 Reason to Buy Advanced Micro Devices Stock

By John Ballard – Feb 28, 2026 at 9:12AM ESTKey PointsAMD’s surging free cash flow suggests a stronger business than its stock price reflects.Strong demand for advanced chips used in data centers is fueling the company's profitability.Shares of Advanced Micro Devices (AMD 1.71%) pulled back to start 2026 and were recently down about 8% year to date, although the stock has recovered. Investors are weighing the stock's high price-to-earnings multiple against risks in the AI chip market, where it is a distant second to Nvidia's leadership. However, investors might be overlooking AMD's surging free cash flow and what this says about the real strength of the company's business. Image source: Getty Images. AMD's free cash flow nearly doubled year over year to $2.1 billion in the fourth quarter. This brought its full-year free cash flow from continuing operations to a record $5.5 billion, which followed the company's surging data center revenue. During the fourth-quarter earnings call with analysts, CEO Lisa Su credited the company's revenue and free cash flow to "broad-based demand for high-performance computing and AI products." The company reported a 34% year-over-year increase in revenue, with adjusted net income up 42% -- also hitting a record of $2.5 billion. ExpandNASDAQ: AMDAdvanced Micro DevicesToday's Change(-1.71%) $-3.49Current Price$200.19Key Data PointsMarket Cap$326BDay's Range$197.75 - $201.8752wk Range$76.48 - $267.08Volume1.2MAvg Vol35MGross Margin45.99% While AMD faces risks competing in the AI chip market, the surging free cash flow reflects a business that might be more competitively positioned than is priced into the stock. The shares are trading at 42 times 2026 free-cash-flow estimates, but that valuation multiple drops to 16 on 2028 estimates. AMD's upcoming data center products, such as its Helios computing platform for AI workloads, could sustain growth in higher-margin products that sustain its free cash flow momentum, making the stock a rewarding investment over the next several years. Read NextFeb 27, 2026 •By Geoffrey SeilerIs AMD a Buy After Meta Deal?Feb 26, 2026 •By Rick OrfordPrediction: AMD Stock Could Soar 50% If This AI Ramp DeliversFeb 26, 2026 •By Manali Pradhan, CFA2 Unstoppable Tech Stocks to Buy Right Now for Less Than $1,000Feb 25, 2026 •By Harsh ChauhanIs AMD Stock Going to $300 After the Meta Platforms Deal?Feb 24, 2026 •By Howard SmithStock Market Today, Feb. 24: Advanced Micro Devices Surges After Meta Strikes Multiyear AI Chip Supply DealFeb 24, 2026 •By Danny Vena, CPAAMD's MI450 Chip Just Landed Its First Mega-Deal. Here's What Investors Should Know.About the AuthorJohn Ballard has been a contributing writer at The Motley Fool since 2016, covering consumer goods and technology stocks. He holds a bachelor’s degree in business administration with a focus in real estate finance from the University of Arkansas at Little Rock.TMFRazorbackStocks MentionedAdvanced Micro DevicesNASDAQ: AMD$200.19(-1.71%)-$3.49NvidiaNASDAQ: NVDA$176.69(-4.43%)-$8.20*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.