To The Moon

$AMD(AMD)$A $50,000 investment in shares of AMD at the beginning of 2012 was worth more than $1.3 million at the end of 2021. Of course, the stock has pulled back 42% so far in 2022, but investors who bought the company's shares a decade ago are still sitting on fat gains.

The good part is that AMD's slide this year has made the stock attractive as far as its valuation is concerned. The stock's price-to-earnings (P/E) ratio of 31 is way lower than its five-year average earnings multiple of 105. The forward P/E of 20 points toward healthy growth in AMD's bottom line over the next year.

More importantly, a closer look at the markets that AMD serves tells us that this company could grow at an impressive pace for years to come. Take the data center business, for example, which currently produces around 20% of AMD's total revenue. The chipmaker has been enjoying terrific traction in this market, as AMD's data center revenue doubled year over year in the first quarter of 2022.

It wouldn't be surprising to see the data center business move the needle in a bigger way for AMD. That's because the company sells data center CPUs (central processing units), GPUs (graphics processing units), data processing units (DPUs), and field-programmable gate arrays (FPGAs).

As a result, AMD now has a complete portfolio of chips to target the fast-growing market for data center accelerators, which is expected to clock an annual growth rate of 32.5% through 2031 as per a third-party estimate. Throw in AMD's solid prospects in the video gaming space, where demand for chips that power gaming PCs and consoles is set to expand, and it is easy to see why analysts are expecting its earnings to grow at almost 33% a year for the next five years -- a growth rate that it could sustain for a longer period.