Shares of Advanced Micro Devices (NASDAQ: AMD ) Pulled back to start 2026 and was down about 8% year to date recently, though the stock has recovered. Investors are weighing the gains from the stock’s high valuation against risks in the AI ​​chip market, where it ranks second. Nvidiathe leadership of

However, investors may be overlooking AMD’s growing free cash flow and what it says about the true strength of the company’s business.

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AMD’s free cash flow nearly doubled year over year to $2.1 billion in the fourth quarter. That pushed its full-year free cash flow from continuing operations to a record $5.5 billion, followed by a boost to the company’s data center revenue.

During a fourth-quarter earnings call with analysts, CEO Lisa Xu credited the company’s revenue and free cash flow to “broad-based demand for high-performance computing and AI products.” The company reported a 34% year-over-year increase in revenue, with adjusted net income up 42% — also hitting a record of $2.5 billion.

Although AMD faces threats to compete in the AI ​​chip market, the rising free cash flow reflects a business that may be in a more competitive position than the stock is priced at. Shares are trading at 42 times 2026 free cash flow estimates, but they Assessment Multiple drops to 16 on 2028 projections.

AMD‘s upcoming data center products, such as its Helios computing platform for AI workloads, could sustain growth in higher-margin products that keep pace with its free cash flow, making the stock a profitable investment over the next several years.

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