Advanced Micro Devices (NASDAQ: AMD) shares fell during intraday trading Monday after Morgan Stanley lowered its rating on the stock, citing high valuations.
Morgan Stanley analysts have downgraded AMD stock from an “overweight” rating to an “equal weight,” while maintaining a price target of $176 per share. The investment bank expressed concerns that AMD’s artificial intelligence (AI) business may not meet the high expectations set by the market.
The analysts argued that investor expectations for AMD’s AI business are overly optimistic. Therefore, they believe that revenue estimates for this segment are unlikely to see significant upward revisions in the near term.
Moreover, the bank pointed out that AMD shares are expensive compared to other companies with substantial exposure to the AI sector. Specifically, Morgan Stanley views Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO) as more attractive investments. The analysts suggest that the AI businesses of these companies are more likely to see upward estimate revisions than AMD.
Additionally, Morgan Stanley expressed concerns about the potential negative impact of Nvidia’s upcoming Blackwell chips, set for release in 2025, on AMD. The analysts believe the market isn’t fully accounting for the competitive threat posed by these new chips.
Morgan Stanley also noted a discrepancy between AMD’s forecasts and investor expectations for AI chip sales. In April, AMD estimated its 2024 AI chip sales would reach $4 billion, whereas investors anticipate a figure closer to $6 billion. The investment bank emphasized that it would take AMD time to ramp up its AI chip supply and develop a supporting ecosystem.
Advanced Micro Devices (NASDAQ: AMD) Stock Movement
On Monday, AMD stock declined 4.49%, closing at $160.34, marking a 1.96% decrease for the week. The trading volume was 67,575,624 shares, significantly higher than the average daily volume of 57.67 million.
Edward Cooke is a financial analyst, freelance writer, and editor. He has six years of experience in financial journalism. He has an in-depth understanding of equities markets, tracking major indices and providing real-time analysis on stock price movements, corporate earnings, and market sentiment.
