Advanced Micro Devices' (AMD) Q2 was "strong across segments" and its upcoming Instinct MI400 GPU series will be a source of optimism and a "key driver" for the stock, Morgan Stanley said in a Wednesday note.
The company's Q3 revenue guidance surpassed analysts consensus estimates, but higher expected operating expenses may limit the impact on EPS, Morgan Stanley analysts said.
The Q3 guidance also excludes any potential revenue from China for its MI308 AI chips, as the licensing process is still uncertain, the analysts said. The company's tone was more conservative the analysts said they expected and seems to reflect less optimism in China than they thought, given its potential to be a multibillion annual opportunity for the company.
However, AMD's upcoming Instinct MI400 GPU series will be the ultimate driver for the stock, the analysts said, noting that the tone of the commentary here was "positive." The chip series remains a "milestone in AI to watch" as the company is notably upbeat on its potential, the analysts said.
Morgan Stanley reiterated the company's stock rating at equal-weight and lowered the price target to $168 from $185.
Price: 158.53, Change: -15.78, Percent Change: -9.05
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