Advanced Micro Devices, Inc’s (ticker: AMD) second quarter (Q2) results for Fiscal Year (FY) 2026 building into greater profits and revenues in the one of the strongest first half (H1) of any year till date. However, trends indicate that this comes at rising concentration risk, much like with Nvidia.

Trend Analysis

As of H1 2026, AMD’s transformation mirrors what happened with Nvidia a few years prior:

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Source: Company Information; Leverage Shares analysis

If present trends continue, revenue will be 26% higher than FY 2025 – a slight slowdown relative to the growth in the previous year. Meanwhile, R&D expenses will be 18% higher than in FY 2025 while diluted earnings per share (EPS) will be 68% higher. While generally deemed a positive signal, the company’s segment mix definitely do not show rising tides raising all boats. “Data Center” already exceeds past FY’s level – an indicator of the higher margins attracted by servicing this segment – while the company’s traditional load bearing “Client & Gaming” segment is running at par while leaking operating income. The “Embedded” segment continues to deliver income growth that is slightly ahead of revenue.

Net operating income swung from a Q2 2025 loss – which had absorbed an $800 million MI308 export-control inventory charge – to nearly $2.0 billion. Free cash flow for H1 2026 hit $4.1 billion, and cash plus short-term investments grew to $13.1 billion. Q3 2026’s revenue guidance was approximately $13 billion (±$300 million), implying +41% growth YoY (Year-on-Year) and 13% sequential growth, with non-GAAP gross margin held near 56%.

The company indicates that its involvement with frontier model companies and hyperscalers continue apace: it announced a strategic partnership with Anthropic to deploy up to 2 gigawatts of MI450 Series GPUs in AMD racks and a multiyear collaboration to optimize AMD’s GPUs and ROCm software development using Claude. It also expanded its collaboration with Microsoft to deploy AMD Helios racks at scale on Azure, which will also add two new AMD EPYC CPU-powered VM series and broaden its deployment of Pensando DPUs (Data Processing Unit) – specialized processors designed to offload networking, storage, and security tasks from the CPU – to support Azure networking services.

The importance of the “Datacenter” segment mustn’t be understated: it now comfortably delivers well over half the company’s revenue while the other segments are trending in decline.

Source: Company Information; Leverage Shares analysis

The high margins accrued from sales are directly contributing to lower cost of sales, resulting in higher operating and net incomes. For the company, corporate demand is being positioned as a foundation that will drive revenue into multiple years. Meanwhile, the retail consumer market – as seen– is precipitously dropping in significance from where it used to be barely five years ago.

It can be reliably assumed that the company will continue to de-emphasize its focus on this segment, due to the relative attractiveness of corporate sales.

The Cost of Transformation in 2026

Despite AMD beating analyst consensus on revenue, EPS, and issuing above-consensus guidance, shares fell roughly 7–9% in the aftermath: a classic “valuation-versus-expectations” story that is questioning the credibility and quality of its H2 2026 ramp. AMD’s growth story is now almost entirely dependent on a handful of hyperscaler and AI lab commitments – the Anthropic partnership, the expanded Microsoft Azure deployment, and the newly launched Helios rack-scale platform – none of which contributed materially to Q2 results. Critically, the non-Data Center segments have seen turbulence for a while: gaming revenue fell 31% on weaker sales while operating income for the “Client and Gaming” segment declined sequentially and year-over-year in dollar terms. Considering this development despite the segment’s relatively strong growth in Q2 2026 in particular suggests there is substantial brewing margin pressure outside of the AI complex.

The concentration risk is more pronounced than other: a small number of AI infrastructure counterparties now drive the growth narrative. Any slippage in AI-relevant MI400-series (MI455X/MI430X) production, ROCm software maturity, or customer capex discipline would directly hit the multiple the stock currently carries. While investors would look for confirmation that the Helios ramp is executing on schedule for a bump in stock price, the earnings release didn’t produce a materially “hotter” surprise to justify substantial multiple expansion.

AI-relevant themes have been highly overvalued over the past few quarters, and this quarter sees corrections are underway. While many investors might look for confirmation that the Helios ramp is executing on schedule to produce a bump in stock price, the earnings release didn’t produce a materially “hotter” surprise to justify substantial multiple expansion. Furthermore, the concentration risk is more pronounced than other: a small number of AI infrastructure counterparties now drive the growth narrative. Any slippage in AI-relevant MI400-series production, ROCm software maturity, or customer capex discipline – squarely in the crosshairs of investors across practically every tech stock – would directly hit the multiple the stock currently carries. Lows will be tested going forward and this will lie more closely with tech stocks than those in most other sectors.

Professional investors in Europe might consider the +3x Long AMD ETP (AMD3) and the -1x Short AMD ETP (FAMDS) during bullish and bearish trends in AMD’s price. To potentially capitalize on major tech stocks seemingly driving the market currently, the 5x Long Magnificent 7 ETP (MAG7) and the -3x Short Magnificent 7 ETP (MAGS) are at hand.

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