AMD Just Joined the $1 Trillion Club. Here's Why Investors Are Betting Big on the Chipmaker.

Advanced Micro Devices (NASDAQ:AMD) hit a major milestone on Sept. 21, surpassing the $1 trillion market capitalization mark. AMD becomes the fourth chipmaker in the rarefied club, joining Nvidia , Broadcom , and Micron Technology .

AMD shares have been on a huge run, jumping 187% so far this year and 23% in the last week as the semiconductor sector rebounds. And while the company has long toiled in Nvidia's formidable shadow, investors are finding plenty to like about the company and its role in the growth of artificial intelligence.

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AMD, as it's called, is much more than a Nvidia competitor. The California-based company makes a wide range of high-performance processors, including graphics processing units (GPUs) and central processing units (CPUs), with widespread applications in personal computers, gaming devices, and, of course, data centers .

And it's the data center business that is helping AMD soar to new heights. Data center revenue in the second quarter was $6.7 billion, up 107% from a year ago. Management attributed the gains to strong demand for the company's EPYC server CPUs and its Instinct GPUs.

On top of that, AMD offers its Helios fully integrated, rack-scale AI systems that operate on 72 Instinct accelerators and 18 EPYC CPUs.

"We enter the second half with strong momentum as EPYC demand accelerates, Instinct deployments scale, and Helios begins to ramp," CEO Lisa Su said. "More broadly, AI is driving a significant expansion in demand for compute across all of our markets, and our leadership portfolio and growing customer visibility position us exceptionally well to capture this expanding opportunity and deliver substantial revenue and earnings growth in the years ahead."

AMD says major AI companies, including  Meta Platforms , Microsoft , Oracle , OpenAI, and Anthropic, are already using the Helios system.

AMD doesn't reach Nvidia's sales level, but it's ramping up quickly. Overall revenue in Q2 was $11.53 billion, up 50% from a year ago. The company had net income of $2.29 billion, up 163%, and diluted earnings per share of $1.38, up 156% from last year.

Just as importantly, AMD's profit margin is growing. Gross margins in Q2 were 54%, up from 40% in the same period a year ago. Management says it expects data center revenue to accelerate further in the second half of the year, allowing earnings to expand.