Q1 Delivers Again, Yet the Cycle May Be Closer to Peak
AMD’s Q1 2026 result adds another data point to what we have already seen across Intel, Nvidia and ASML. Demand is still holding up across the broader semiconductor value chain.
The concern is where we are in the cycle. Hyperscaler capex keeps stretching higher, with Meta and Amazon pushing closer to negative free cash flow as they fund the data centre and AI infrastructure buildout. That tells us demand is strong, but it also suggests the semiconductor cycle may be moving closer to its peak.
AMD shares have already gained more than 60% over the past month and more than 250% over the past 12 months. That is a huge move, and it raises the bar for what the company now needs to deliver.
Like Intel, AMD’s main value-accretive segment was data centres. Data centre revenue surged 57%, while total group revenue reached US$10.3 billion. The broader semiconductor SOX rose 4.4% after the result, while AMD shares gained 17% after hours trading.
But when we look at semiconductor cycle history and AMD’s current valuation, the picture becomes more interesting for investors. Strong demand is still there, but the easy part of the re-rate may already be behind us.
Data Centre Strength Is Real
For the period ended March 28, AMD reported adjusted earnings of US$1.37 per share, while revenue rose 38%.
Profitability also looked strong. Gross margin expanded to 53%, up from 50% a year ago, while operating margin reached 14%, compared with 11% last year. The main driver was mix. AMD is selling more into data centres, and that is pulling the business toward higher-margin revenue.
The Client and Gaming segment, which includes AMD’s PC business, generated US$3.6 billion in revenue, up 23%. That was a solid result, especially when compared with Intel’s PC division, which grew just 1% over the same period.
Client revenue rose 26% to US$2.89 billion, while Gaming revenue increased 11% to US$720 million. Radeon gaming GPU demand helped drive the result, although this was partly offset by weaker semi-custom revenue.
The Hard Part Now Is Beating Expectations Again
AMD has a clear leg into the next phase of the AI growth wave through its accelerators and CPUs.
As the AI cycle shifts from simply building models to running models and workloads at the lowest possible cost, CPUs become more important. That plays into AMD’s favour. Much of the growth in its Data Centre segment came from demand for AMD EPYC CPUs, which remain a major driver of adoption.
This is where AMD looks better positioned than Intel. Intel’s data centre recovery is helping offset major losses in its foundry business, while its PC business is only delivering stable growth. AMD does not carry the same foundry drag, and its data centre momentum looks cleaner.
The issue is valuation. AMD is trading near highs, with its P/E sitting around 80x. The market is already pricing in strong growth, margin expansion and roughly 66% EPS growth next year. That leaves little room for disappointment.
Even if earnings continue to expand, we can see a path where margins come under pressure over time. The market narrative is that AI demand can keep stretching through to 2029, supported by strong pricing power and hyperscaler demand. That may prove right, but at this valuation the margin of safety is thin.
Nvidia still looks more attractive on a relative pricing basis. It trades on a lower earnings multiple, has a stronger AI platform, and still has major optionality in areas like robotics. That does not make AMD a bad business. It just makes the setup less compelling after such a large rally.
AMD delivered a sterling quarter. Demand is strong, the Data Centre segment is accelerating, and the business looks far cleaner than Intel. But with the semiconductor cycle potentially nearing its peak, AMD looks more like a hold than a fresh buying opportunity.
