Morgan Stanley Rocks AMD Stock With New AI Warning


  • AMD (AMD) stock is sinking 4% in early trading after Morgan Stanley downgraded the shares.
  • The bank warned that investors are overly optimistic about the company’s AI chip business. 
  • Morgan Stanley prefers Nvidia (NVDA) and Broadcom (AVGO) over AMD. 
AMD stock - Morgan Stanley Rocks AMD Stock With New AI Warning

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Morgan Stanley analysts downgraded AMD (NASDAQ:AMD) stock today to an “equal weight” rating from an “overweight” rating However, the investment bank maintained a $176 price target on the shares.

Morgan Stanley believes that the chipmaker’s artificial intelligence (AI) business may not be able to meet the Street’s high expectations. AMD stock is falling 4% in early trading.

Overly Optimistic Projections and an Expensive Stock

Given investors’ overly high expectations for AMD’s AI business, analysts’ estimates for it are unlikely to rise much going forward, Morgan Stanley’s analysts contended.

Further, the investment bank believes that AMD’s shares are expensive compared to other names that have a great deal of exposure to the AI boom. Specifically, Morgan Stanley views Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) as better buys than AMD stock. Analysts are more likely to raise their estimates for those firms’ AI businesses than for AMD’s AI offerings, Morgan Stanley contends.

AMD Stock: Investors Are Failing to Factor in Multiple Challenges

Morgan Stanley believes the Street is not adequately accounting for the negative impact that Nvidia’s release of its new Blackwell chips in 2025 will have on AMD.

Moreover, in April, AMD estimated that its 2024 AI chip sales would come in at $4 billion, but investors still think that the actual number will be $6 billion, the bank reported. Morgan Stanley explained that it would take AMD time to increase its supply of AI chips and develop an ecosystem surrounding them.

AMD Is Facing Other Challenges

In a column published last month, I noted that the shipments of laptops and PCs powered by AMD’s chips had dropped a combined 1% year-over-year in the last quarter of 2023. What’s more, its share of the total chip market sank to 20% in Q1, significantly lower than the peak of 24% that it had attained in Q2 of 2022.

Further, AMD will face increased competition from the major cloud players that are developing their own AI chips.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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