AMD's China AI Sales Rebound Amid Valuation Overhang and Geopolitical Risks

What happened

AMD is reportedly poised for a rebound in AI GPU sales to China, with a potential $675 million order from Alibaba for its MI308 chips, signaling renewed demand against domestic alternatives. This development follows AMD's projection of EPS growth from under $4 in 2025 to over $24 by 2030, as highlighted at its 2025 Financial Analyst Day. However, the DeepValue master report notes AMD's stock has surged ~73% in 12 months and trades at extreme multiples like ~106x P/E and ~66x EV/EBITDA, implying the market prices in years of flawless AI execution. The report also warns of significant risks, including U.S. export controls on China, intense competition from Nvidia and Arm-based designs, and high sensitivity to the AI cycle. Consequently, while the China news is positive, it occurs against a backdrop of elevated expectations and limited margin of safety, as filings highlight dependency on third-party foundries and customer concentration.

Implication

Increased AI GPU sales to China could provide a revenue uplift and support AMD's growth narrative in the data center segment. However, investors must critically evaluate whether this represents durable market share gains or a temporary rebound amid ongoing export control uncertainties. The DeepValue report emphasizes that AMD's valuation already discounts perfection, with a DCF implying intrinsic value far below the current price, leaving little room for operational missteps. Geopolitical exposure adds volatility, as tighter U.S. restrictions or supply chain constraints could quickly erode gains in the Chinese market. Overall, this news aligns with the 'WAIT' recommendation, suggesting investors monitor for better entry points rather than chasing the stock at current levels.

Thesis delta

The new China sales potential underscores AMD's AI momentum but does not fundamentally alter the valuation overhang or competitive risks highlighted in the DeepValue report. It introduces a geopolitical catalyst that could boost near-term results but also heightens exposure to regulatory shifts, requiring close scrutiny. Therefore, the core thesis remains unchanged: wait for a more attractive entry point despite positive fundamental developments.