Two major Wall Street firms reached diametrically opposite conclusions on Advanced Micro Devices Inc. [NASDAQ: AMD] on May 13, crystallising a debate that has been building throughout the chip sector’s extraordinary 2026 rally: whether the company’s spectacular fundamentals can justify a valuation that has become equally spectacular.

Daiwa Capital Markets analyst Louis Miscioscia downgraded AMD from Buy to Outperform, even as he doubled his price target from $250 to $500, in what amounts to one of the more unusual analyst actions in recent memory.

Miscioscia described AMD’s first-quarter 2026 results as “very good,” noting that revenue of $10.3 billion came in 38% above the prior year and beat the Street estimate of $9.9 billion by $361 million, while second-quarter guidance of $11.2 billion landed $682 million ahead of consensus, implying 46% year-over-year growth.

Despite those figures, the downgrade is entirely valuation-driven, with Miscioscia flagging that AMD shares have surged nearly 150% over the past 60 days, stretching the stock to approximately 154 times trailing price-to-earnings, a multiple he believes warrants a more cautious near-term stance.

“Given the appreciation of almost 150% over the past 60 days, near term it could moderate,” Miscioscia wrote, adding that the change in rating reflects valuation rather than any change in the firm’s positive long-term view on AMD’s growth trajectory.

Daiwa raised its 2026 revenue and earnings per share estimates to $49 billion and $7.25 respectively, and its 2027 estimates to $72.7 billion and $12.85, with the $500 price target representing approximately 39 times the firm’s 2027 EPS forecast.

Bank of America’s Vivek Arya took the opposite view on the same day, raising his price target from $450 to $500 while reiterating a Buy rating, anchoring the upgrade in a sector-wide revision to the AI data centre total addressable market that BofA now projects will reach $1.7 trillion by 2030.

Arya’s thesis centres on continued EPYC server CPU share gains and the growing MI accelerator family as the primary revenue drivers that will carry AMD’s growth well into the second half of the decade.

AMD also attracted management endorsement on the long-term opportunity, having doubled its 2030 estimate for the x86 total addressable market to more than $120 billion and raised its compound annual growth rate projection from 18% to 35%.

The stock currently carries a market capitalisation of approximately $748 billion, up 109% year to date, with a GF Value assessment suggesting the stock is approximately 98% overvalued relative to intrinsic value, adding weight to the valuation concerns Daiwa has raised.

Insider selling adds another cautionary note, with a total of $54.6 million in AMD shares sold by company insiders over the past three months, including activity from senior executives, which analysts note can weigh on sentiment even when sales are driven by personal financial planning rather than fundamental concerns about the business.