Opinion: AMD Will Be the Semi Play to Beat in 2026

It may have been a wilder ride for the semiconductor stocks and the broader AI trade in 2025. But for the many brave investors who stayed the course, it’s been a rewarding year, with the VanEck Semiconductor ETF (NASDAQ:SMH | SMH Price Prediction), my favorite “thermometer” to gauge the heat of the semiconductor stocks, gaining close to 50% on the year.

Undoubtedly, with Dr. Michael Burry of The Big Short fame, likely sticking with his bearish bets (and views) of AI for the new year, it might seem a bit dangerous to stick with the red-hot performers in the semis. Advanced Micro Devices (NASDAQ:AMD) has been a surprising 2025 winner, with shares now poised to finish the year up just shy of 80%.

The semiconductor stocks are a choppier ride, but their next course will be very interesting

Of course, the gains for Advanced Micro Devices would have been more magnificent had it not been for the more recent 19% drop, which seems to have more to do with fading sentiment for the AI trade than anything else. While the fate of the AI (and the semi) trade is sure to be one of the top stories going into 2026, I do think that the question investors should be asking themselves is how the players within the space will fare as the race continues on.

Even if fewer investors are interested in punching a ticket to the race, the top names will still be eagerly investing in efforts to pick up the pace with the hopes of improving their positioning in what could be a multi-year marathon that will see no shortage of steep ups and downs.

While it’s too soon to tell which semi players will come out of the new year ahead, I do think that it’s worthwhile to have a closer look at the strategies, things that have changed in the past year, and, of course, the valuation metrics going into 2026. On all fronts, I do see shares of Advanced Micro Devices as one of the brighter shining stars as a new year rings in and a new (or perhaps not) slate of winners arises in the semi space.

Advanced Micro Devices’ value proposition seems to be getting better

So, what happened for Advanced Micro Devices CEO Lisa Su and company? While her firm hasn’t yet caught up to the great Nvidia (NASDAQ:NVDA) in the AI race, I do think that investors are becoming content that the firm can still thrive in that number-two spot.

Notably, being player number two could still entail significant rewards, especially as the firm differentiates itself via its architecture and unique value proposition, which, I believe, might win out in an environment where investors want big AI spenders to pull back a bit. Perhaps Advanced Micro Devices is a more compelling option for firms with tighter budgets that still want to back up the truck on the GPUs to stay rolling ahead in this AI race.

Of course, I’m sure firms with the cash will be more than willing to pay more to get the very best as they scale up. That said, given the likelihood that investors won’t stop focusing on efficiencies, monetization strategies, and more deliberate cost controls, I do think that having the best might accompany diminishing returns. In any case, the relative value of Advanced Micro Devices’ chips, especially for memory-bound inference, is becoming more impressive, at least in my opinion.

Finally, the latest and greatest Nvidia chips might remain scarce resources, as big AI spenders look to hoard. For Advanced Micro Devices, that’s an opportunity to step in. All considered, if you see the environment gravitating towards higher value and more memory-bound inference, I think Advanced Micro Devices has all the tailwinds it takes to have another great year. Personally, I wouldn’t rule out another Nvidia-beating year in 2026.