$Advanced Micro Devices (AMD.US)$On Monday, AMD became the focus of the market as Morgan Stanley downgraded the rating of this semiconductor giant. The bank's analyst, Joseph Moore, adjusted AMD's rating from "shareholding" to "hold and watch", although the target price remained unchanged at $176, this move still triggered market selling of AMD stocks, and the stock price closed down by 4.49% to $160.34 per share. It is understood that AMD's stock price rose by a cumulative 43% in the fourth quarter of last year and a further 22% in the first quarter of this year, but has fallen by 11% from the second quarter to date, compressing the year-to-date increase to about 9%.
In an investor report, analysts including Moore pointed out that although they have a positive outlook on AMD's long-term story, investors' expectations for the company's artificial intelligence (AI) business seem to be "too high". The analyst believes that the growth potential of the AI business is limited, so they prefer to recommend$NVIDIA (NVDA.US)$ and $Broadcom (AVGO.US)$.
The above analysts said that although AMD has a "strong product lineup" in the client and server CPU markets and is likely to gain a foothold this year, expectations around its artificial intelligence business have not left much room for stock price gains. They continue to believe that AMD's position in its core market is increasingly solid, but expectations of sustained high levels of artificial intelligence are making them cautious about the company's ability to demonstrate its premium multiples.
Morgan Stanley believes that AMD can achieve its $4 billion AI-related revenue target this year, but buyers' expectations are obviously higher. Analysts at the bank pointed out that investors' expectations still seem to be based on supply chain forecasts, which point to figures above $6 billion, although AMD has been conveying information that building an ecosystem around new solutions takes time.
In addition, analysts also mentioned that compared with Nvidia's revenue, AMD's $4 billion target seems relatively small, but the market's expectations for the impact of Nvidia's launch of Blackwell products on competitors may not have made enough adjustments. They believe that AMD may mainly gain revenue in reasoning, while Nvidia may gain more comprehensive returns.
It is understood that at the end of April, AMD expected its AI chip sales to reach $4 billion this year, higher than the company's previous estimate of $3.5 billion. According to Morgan Stanley, AMD can achieve this goal and continue to grow in 2025, "but our trouble is that investors' expectations point to $6 billion."
In another report, Morgan Stanley resumed its buy rating on Broadcom and gave it a target price of $1,658, calling it the second-favorite AI semiconductor company after Nvidia.
Overall, analysts remain cautious about AMD. Although some analysts on Wall Street have given buy ratings, Seeking Alpha's authors and quantification systems have both rated AMD as hold.
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