There’s good news for Advanced Micro Devices (NASDAQ:AMD) shareholders who’ve had the guts to stick with the stock and resist the temptation to take profits. Shares are up 65% just since early April. And another batch of encouraging AMD stock news materialized this week — Stifel believes the chipmaker is doing even better than expected right now, meriting a higher price target.

Maybe it does. Though archrival Nvidia (NASDAQ:NVDA) continues to crush it on all fronts while former partner-turned-competitor Intel (NASDAQ:INTC) is sure to make waves, there’s a broad-rising tide on the technology front that could lift the AMD boat just as well as it lifts any other player’s.

In other words, Stifel isn’t thinking crazy here.

On the other hand, there are some major valuation concerns that need to be addressed.

What He Said

Analyst Kevin Cassidy made the call, explaining “We continue recommending the AMD shares as a higher percentage of its revenue transitions to the newer, higher margin Zen-based CPUs,” prompting Stifel to raise its price target from $17 to $21. That’s 25% above the current price of AMD stock, and 118% higher than where shares were trading just three months ago.

Stifel’s optimism wasn’t dished out for no particular reason — much of the AMD stock news of late has been bullish.

Case in point: Analytical outfit Detwiler Fenton noted last month  that “the fundamentals that underpin the CPU server market are fundamentally changing; with more complex competition coming online from x86 architectures (e.g., AMD) and in the future we will likely see ARM CPUs join the mix as well.” He added that the shift toward public cloud platforms “would not bode well for current market leader INTC.”

Stifel’s Cassidy acknowledged the same on Monday, explaining “The surprise upside may come from the company’s Epyc server CPU gaining traction ahead of consensus expectations for 5% unit market share exiting” the fourth quarter of 2018.

It’s not just the server market that’s paving the way for Advanced Micro Devices’ growth, however. As was noted, there’s a broad rebound for the PC market, as consumers and corporations are finally being forced to upgrade their hardware. Cassidy added, “Given the many positive PC industry data points for 2Q18, we believe shipments for AMD’s Zen-based PC CPU line-up tracked in-line to slightly better than management’s guidance,” noting IDC’s number-crunching that indicated PC shipments grew 2.7% in the second quarter.

The analyst concluded, “We expect AMD to benefit from the stronger than expected results, especially given the trends for enterprise, gaming, and high-end notebooks, all markets in which AMD has improved its competitive position through its Ryzen processors.”

What He Didn’t Say

Still, a price target of $21 translates into a forward-looking price-to-earnings ratio of almost 34, based on next year’s projected per-share profits of 62 cents. Even with a respectable beat of those expectations, AMD stock would still be richly, dangerously priced.

Were the company bulletproof or in a strong position to hold onto the 12 points’ worth of GPU revenue share Morgan Stanley analyst Joseph Moore says AMD has gained over the course of the past six quarters, such a valuation might be justified. Moore believes, however, that rival Nvidia will soon be taking graphics card sales back. Specifically, next-generation GPUs to be unveiled at Gamescom in August is likely to kickstart a recovery of Nvidia’s share of the graphics card market.

Also arriving in August will be Intel’s 9th generation of its Coffee Lake CPU, poised to take on AMD’s Ryzen.

In the meantime, China’s Chengdu Haiguang IC Design Co. (Hygon) is making fully licensed CPUs that are — for all intents and purposes — near-perfect copies of AMD’s x86 processors. Though it’s possible they could by stymied by the brewing trade war, they still pose — and point to — a significant threat.

These collective potential pitfalls leave no room for error from a company with a stock priced at more than 30 times next year’s expected bottom line.

Bottom Line on AMD Stock

It’s encouraging AMD stock news, to be sure. But, Stifel’s optimism is also rather speculative, ignoring the risks at hand.

That doesn’t mean Advanced Micro Devices won’t reach $21 sooner or later, and perhaps even sooner than later. Hype is an incredible force, and can’t be dismissed. Good reason or not, if it’s what prods a stock higher, then it’s a trade worth taking.

Just take the call with a grain of salt, knowing that Stifel could change its mind at a moment’s notice, pulling the rug out from underneath shares at the first sign that AMD isn’t acing it on each and every front.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.