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Key Takeaways
- Advanced Micro Devices stock fell in intraday trading Monday as it was downgraded by Morgan Stanley over concerns that expectations are too high for the chipmaker’s artificial intelligence (AI) products.
- The analysts cut AMD’s rating to “equal weight” from “overweight,” but held the price target steady at $176.
- Morgan Stanley said it saw limited upward potential for AMD’s AI business, preferring Nvidia and Broadcom instead.
Advanced Micro Devices (AMD) shares declined Monday as Morgan Stanley downgraded the stock, warning that expectations of financial gains from its artificial intelligence (AI) products may be too high.
Morgan Stanley reduced its rating to “equal weight” from “overweight,” while maintaining a $176 price target.
‘Investor Expectations for the AI Business Still Seem Too High’
Analysts wrote in a note to clients that “investor expectations for the AI business still seem too high to us.” They explained that they see “limited upward revision potential for AI from here” for AMD, and preferred Nvidia (NVDA) and Broadcom (AVGO) among the large-capitalization AI chipmakers.
“We like the narrative but AI bar remains high,” the analysts added.
Morgan Stanley said while it continues to see AMD as increasingly well-positioned in its core markets, “persistently high AI expectations make us more cautious on their ability to justify a premium multiple.”
Shares of AMD were down 3.4% to $162.09 as of 12:52 p.m. ET Monday but have risen about 10% so far this year.