Monday closed down more than 4%! AMD's AI business high expectations were poured cold water by Morgan Stanley downgrading its rating to hold and wait

According to the financial news app Zhitong Finance, AMD (AMD.US) became the focus of the market on Monday because Morgan Stanley downgraded its rating on this semiconductor giant. Analyst Joseph Moore adjusted AMD's rating from "Buy" to "Hold" while maintaining the target price at $176. This move triggered selling of AMD stocks, with the stock price closing down by 4.49% to $160.34 per share. It is understood that AMD's stock price rose by 43% in the fourth quarter of last year, further increasing by 22% in the first quarter of this year, but has since fallen by 11% in the second quarter, compressing the year-to-date gain to about 9%. In an investor report, Moore and other analysts pointed out that while they remain optimistic about AMD's long-term story, investors' expectations for the company's artificial intelligence (AI) business seem "too high". The analysts believe that the growth potential of the AI business is limited, so they are more inclined to recommend NVIDIA (NVDA.US) and Broadcom (AVGO.US) among large AI semiconductor companies. The analysts mentioned above stated that although AMD has a "strong product lineup" in the client and server CPU markets and is likely to gain ground this year, the expectations surrounding its AI business do not leave much room for stock price appreciation. They continue to believe that AMD's position in its core markets is strengthening, but the high expectations for AI are making them cautious about the company's ability to demonstrate its premium multiple. Morgan Stanley believes that AMD can achieve a $4 billion AI-related revenue target this year, but buyers' expectations are evidently higher. The analysts at the firm 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 the message that building an ecosystem around new solutions takes time. Furthermore, the analysts also mentioned that compared to NVIDIA's revenue, AMD's $4 billion target seems relatively small, but the market may not have adjusted expectations enough for the impact of NVIDIA's Blackwell product on competitors. They believe that AMD may primarily gain revenue in inference, while NVIDIA may achieve a more comprehensive return. It is reported 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. Morgan Stanley stated that AMD can achieve this target and continue to grow in 2025, "but the trouble we encounter is that investors' expectations point to $6 billion." In another report, Morgan Stanley resumed its "Buy" rating on Broadcom and set a target price of $1658, calling it the second favorite AI semiconductor company after NVIDIA Overall, analysts are cautious about AMD. While some analysts on Wall Street have given a buy rating, authors on Seeking Alpha and quantitative systems have rated AMD as a hold