Misconceptions in the AI Chip Field
Morgan Stanley analyst Joseph Moore delivers a reality check amidst the buzz surrounding Advanced Micro Devices (NASDAQ:AMD). Moore cautions that while there is a significant opportunity in the AI chip sector, expectations for companies like AMD may be inflated.
Maintaining a Cautious Outlook
Expressing his perspective, Moore states, “We like the AMD story, but investor expectations for the AI business still seem too high to us.” He sees limited room for further growth in the AI segment and believes that persistently ambitious forecasts could impede AMD’s ability to justify a premium valuation.
Competition with Nvidia
Despite AMD’s efforts to challenge Nvidia’s supremacy in AI chips, Moore is skeptical about AMD’s ability to make substantial inroads. He highlights Nvidia’s upcoming Blackwell GPU architecture as a potential game-changer, a factor that investors may have underestimated.
While AMD is considered a formidable rival to Nvidia due to its versatile offerings, Moore suggests that Nvidia views AMD as a genuine threat. Moore notes Nvidia’s defensive stance in safeguarding its market share, accelerating its product roadmap, and adopting aggressive pricing strategies, all of which could pose challenges to AMD’s ambitions.
Shifting Focus
Moore’s optimistic outlook for AMD, following a downturn in various markets, was previously supported by expectations of core business acceleration and AI’s role in driving multiple expansions. However, Moore observes a shift where AI is now becoming the primary growth driver for the company.
Revised Rating and Forecast
In response to these developments, Moore downgrades AMD’s rating from Overweight to Equal-weight while maintaining a price target of $176. This target suggests potential gains of 9.5% from current levels. The overall consensus among analysts leans towards a Strong Buy for AMD, with an average price target of $191.03 indicating a potential 19% uptick in share price over the next year.
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended for informational purposes, and it is crucial to conduct individual research before making any investment decisions.
