The wave of AI agents is accelerating CPU demand growth, but Morgan Stanley believes that capturing this trend through memory stocks like Micron and SanDisk offers a better risk-reward ratio than directly positioning in Intel or AMD.
According to Follow-the-Wind Trading Desk, in a semiconductor industry report released on April 20, Morgan Stanley pointed out that recent challenges in Intel's server roadmap and uncertainty regarding its foundry strategy, combined with the fact that AMD's stock price is primarily driven by GPU rather than CPU logic, have complicated the investment thesis for going long on CPU stocks.
It further noted that memory is not only a direct beneficiary of accelerated CPU demand but also benefits from multiple structural growth trends, including the surge in demand for HBM and enterprise solid-state drives (eSSDs).
Demand for data center memory from hyperscale cloud service providers will remain tight at least until the end of 2027, and the supply gap remains in its early stages. Meanwhile, long-term procurement agreements between memory suppliers and customers are being finalized at an accelerating pace, bringing substantial upfront cash inflows.
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<h2>CPU Demand Accelerates, But Direct Beneficiary Paths Hide Complexity</h2>
Long-term CPU growth rates are estimated at around 30% to 40%, far exceeding historical averages, yet still below market expectations for GPU growth.
On the supply side, Intel's capacity is significantly insufficient. The simultaneous acceleration of demand and constraints on the supply side make quantitative assessment of the overall trend more difficult.
More importantly, for both Intel and AMD, although server business is the core of their profit prospects, neither company's stock valuation relies solely on server CPUs— Intel's investment theme points more toward foundry services, while AMD's long-term narrative centers on GPUs.
This reality makes the simple equation of &#34;buy CPU stocks when the CPU sector is booming&#34; difficult to sustain.
<h2>Intel: Server Price Increase Logic Holds, But Roadmap Risks Remain</h2>
The logic behind raising Intel's price target lies in the increase in average selling price (ASP) and shipment volume. It is forecast that Intel's Data Center and AI (DCAI) revenue will reach approximately $21.8 billion in 2026, a year-over-year increase of about 30%, with server unit shipments growing 14% and ASP rising 20%.
However, Intel is unlikely to truly regain market share from AMD. Its next-generation server product, Diamond Rapids, has been criticized for significant shortcomings, with negative feedback coming directly from industry channels.
AMD's Venice platform is considered a &#34;clear major advancement,&#34; utilizing TSMC's N2 process with ample supply, making Intel's logic of competing for share using its own fabs untenable.
Additionally, it is expected that Intel's PC business will face pressure, with forecasts showing desktop revenue declining 16% year-over-year and notebook revenue dropping 8% by 2026, mainly dragged down by the contraction of the DIY market due to rising GPU prices and AMD's continued share gains.
Furthermore, skepticism remains regarding the long-term prospects of Intel's Foundry business, viewing the possibility of the segment achieving positive DCF as &#34;still distant,&#34; despite maintaining some attention on the Terafab partnership.
<h2>AMD: Product Leadership Exists, But GPUs Are the True Stock Drivers</h2>
AMD possesses stronger product capabilities in the server CPU market, making it a greater beneficiary of the CPU upcycle, with its share in the general-purpose CPU market expected to continue expanding. The Venice platform will further consolidate this advantage.
However, the core contradiction in AMD's current stock price is that the vast majority of its 2030 revenue target comes from GPUs; therefore, improvements in the GPU business are the more critical variable driving the stock price.
Last quarter's experience confirmed this judgment—while server business performance was strong, the stock still corrected sharply because market focus remained on GPUs.
Regarding gross margins, management has been cautious in its wording regarding the trajectory after the first quarter, as AMD needs to allocate some CPU resources to drive GPU ecosystem adoption, which may bring targeted discount pressures, thereby limiting the extent of overall profitability improvement.
<h2>Memory Stocks: Low Valuation Plus Multiple Benefits Offer Optimal Win/Loss Ratio</h2>
Micron and SanDisk are the preferred targets for positioning in the CPU and AI demand trend, primarily due to their significant valuation advantages. According to the report's 2026 forecasts, Micron and SanDisk are currently trading at approximately 5.7x and 11.5x P/E ratios respectively, with clear upside potential visible.
On the demand side, hyperscale cloud providers will be unable to meet data center memory needs at least until 2027, with the supply-demand gap remaining in a &#34;very early stage.&#34;
Occasional softness in spot prices (such as retail aftermarket modules) is considered unrelated to the structural shortage at the data center end and holds no reference value.
Regarding long-term agreements, it is expected that clear evidence this year (in the form of substantial cash inflows and deferred revenue) will demonstrate that prepayment agreements are being executed.
Micron has a price target of $520, and SanDisk has a price target of $690, both maintaining an Overweight rating. Under the premise that AI agents will drive accelerated CPU demand, memory stocks offer the optimal risk-reward ratio.

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AI agents are driving CPU demand growth of 30%-40%, but Morgan Stanley believes that 'buying CPU stocks when the CPU sector is booming' is unwise, as Intel's new products have defects and AMD's stock price is actually driven by GPUs. However, memory not only benefits from the acceleration in CPU demand but also from the growth in HBM and enterprise SSD demand, making it a potentially superior investment target

- Morgan Stanley's report highlights a growing demand for CPUs due to AI advancements, suggesting that investing in storage companies like Micron and SanDisk offers a better risk-reward balance than directly investing in Intel or AMD.  
- The report notes complexities in directly profiting from CPU demand, as both Intel and AMD's growth trajectories are mainly driven by factors beyond their CPU divisions.  
- With significant cash inflows from long-term agreements and robust memory demand projected until at least 2027, storage stocks are positioned as attractive opportunities amidst ongoing supply constraints.

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Morgan Stanley: Why the Win/Loss Ratio for Buying Memory Is Better Than Buying CPUs