AMD’s Strategic Push into China’s AI Chip Market

Advanced Micro Devices (AMD) is positioning itself for a significant expansion in the artificial intelligence accelerator sector, with a major potential order from a Chinese tech giant capturing market attention. Concurrently, Wall Street analysts maintain a broadly optimistic outlook for the semiconductor company's shares heading into 2026.

Market experts project substantial upside for AMD's equity. The consensus rating among analysts fluctuates between "Moderate Buy" and "Strong Buy." The average price target sits in a range of $277 to $280, suggesting an approximate 29% to 31% appreciation potential from recent levels. Individual targets display a wide dispersion, from a low of $140 to a high of $380.

Bank of America recently reaffirmed its Buy recommendation, setting a $300 price objective. The firm identifies 2026 as a pivotal inflection point for global AI infrastructure. Several institutions raised their targets following AMD's strong third-quarter 2025 results, which showcased record revenue of $9.25 billion, representing 36% year-over-year growth.

A Potential Landmark Order from Alibaba

Industry reports indicate that Alibaba is evaluating a purchase of 40,000 to 50,000 MI308 AI accelerators. This transaction would rank among AMD's largest single deals in China since the implementation of U.S. export restrictions on advanced AI semiconductors.

Key reported details of the speculated agreement include:

• Order Volume: 40,000 to 50,000 MI308 units.
• Revenue Impact: An estimated $500 million to $800 million in additional sales.
• Earnings Contribution: Roughly $0.10 to $0.20 in non-GAAP earnings per share.
• Pricing: Estimated at $12,000 to $15,000 per chip, approximately 15% below Nvidia's competing H20 model.

The MI308 is AMD's China-compliant AI accelerator, specifically engineered to adhere to current U.S. export regulations. Featuring 192 GB of HBM3 memory, the chip is capable of inferencing large language models with up to 70 billion parameters and long contexts on a single card.

Navigating the Regulatory Landscape

AMD's CEO, Lisa Su, confirmed in early December that the company has obtained export licenses for the MI308. Under the approved framework for shipments to Chinese clients, AMD will remit a 15% fee to the U.S. government on sales. This model stems from an arrangement between U.S. authorities and semiconductor firms, permitting limited shipments to China in exchange for a share of the revenue.

The regulatory environment remains complex. Chinese officials have called for more stable supply chains from the U.S., while simultaneously introducing new directives that prioritize domestically produced AI chips in state-funded data centers.

Should investors sell immediately? Or is it worth buying AMD?

Solid Q3 2025 Foundation and Q4 Outlook

The company's latest quarterly earnings demonstrated robust momentum across its key divisions:

• Total Revenue: $9.25 billion (a record quarterly result).
• Data Center Revenue: $4.3 billion (a 22% year-over-year increase).
• Client & Gaming Revenue: $4.0 billion (surge of 73% compared to the prior year).
• Non-GAAP Gross Margin: 54%.
• Diluted EPS (non-GAAP): $1.20.

For the fourth quarter of 2025, AMD provided revenue guidance of approximately $9.6 billion, equating to 25% annual growth. This forecast does not yet include potential revenue from MI308 shipments to China, which could provide an additional boost if the Alibaba deal materializes.

Broad Partnerships Underpin AI Strategy

Beyond the potential Chinese order, AMD is expanding its AI business through several major collaborations:

• OpenAI: A planned 6-gigawatt deployment of AMD Instinct GPUs.
• Oracle: Utilization of 50,000 GPUs for cloud services.
• HUMAIN Joint Venture: A $10 billion partnership with Cisco for AI infrastructure.

Furthermore, AMD has introduced its MI350 GPU series and announced the MI450 Rackscale platform. These moves position the company to compete more directly with Nvidia in the high-performance AI accelerator segment.

Valuation and Competitive Context

AMD currently commands a market capitalization of around $350 billion and trades at a price-to-earnings ratio of approximately 106. This elevated valuation reflects strong market expectations for continued AI-driven growth but also leaves the shares vulnerable to any execution missteps.

In the AI accelerator market, AMD faces a dominant competitor; Nvidia is estimated to hold roughly 80% market share. AMD's strategy emphasizes a competitive price-to-performance profile aimed at enterprise customers and includes the expansion of its ROCm 7 software and developer platform. These elements are central to capturing a larger share of the expanding AI infrastructure market.

Holiday Trading Activity

In a shortened trading session on the Tuesday before Christmas, AMD shares closed at $215.04. Trading volume was notably light at approximately 8 million shares, well below the average of 29 million. The thin liquidity characteristic of holiday trading limited significant price movements, despite ongoing speculation regarding the company's China business. In after-hours trading, the stock was virtually unchanged at $214.63, underscoring a wait-and-see attitude among participants ahead of the market holiday.