AMD is still inexpensive for an AI stock: Morgan Stanley

Advanced Micro Devices Inc (NASDAQ: AMD) is in focus today after a Morgan Stanley strategist added the semiconductor behemoth to his “equity model portfolio”.

AMD stock pulled back after Q2 earnings

Daniel Skelly dubs the post-earnings weakness in AMD an opportunity to buy as it’s now trading at a significant discount for an AI stock.

AMD is a leader in chip end markets with potential AI tailwinds. It continues to take share from key competitors as it launches competitive and on-time new chips and supporting product roadmaps.

Last week, the chipmaker reported an 18% year-on-year decline in its quarterly revenue but the management did signal that things will likely improve in the back half of 2023.

AMD stock is still up roughly 70% versus the start of the year.

Skelly is not bullish broadly on the chip sector

It is also important to note that despite pockets of weakness, Advanced Micro Devices noted a big increase in AI engagements in its fiscal second quarter.

Interestingly, Skelly is not constructive on the semiconductor space at large. On AMD stock, though, he wrote in his research note on Thursday:

We believe current valuation at ~27x consensus F24E EPS appears compelling given its opportunity to grow share in CPU/GPUs and drive new incremental share from AI applications.

Lisa Su – the Chief Executive of AMD forecasts AI chips in data centres alone to be a $150 billion market within the next four years. She’s slated to launch the AI-focused MI300 chip later this year.