The Morgan Stanley Bull Case Predicts This Chip Manufacturer Will Generate More Than $1 Billion In Ai Revenue Next Year

Morgan Stanley has acknowledged that it may have underestimated the full potential of chipmaker Advanced Micro Devices (AMD) in the field of artificial intelligence (AI).

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In a note to clients, analyst Joseph Moore stated, "We have tried to set conservative forecasts for AMD's AI, given historic false starts, but higher price points plus supply chain commentary is pointing to an opportunity that is multiples of our initial target." As a result, Moore has revised the firm's AI revenue forecast for AMD in 2024 to $400 million, up from the previous estimate of $100 million. Additionally, in a bullish scenario, the forecast suggests the potential for generating over $1 billion in revenue.

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Moore expressed confidence in the revised forecast, stating, "We would view our $400 million number as conservative given what we have heard, and we don't think the $1.2 billion is wildly optimistic, though there are things that have to happen to achieve that."

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Like many stocks associated with artificial intelligence, AMD's shares, which provide the underlying technology for graphics processing units (GPUs) used in numerous AI models, have experienced a significant surge of over 49% this year. Morgan Stanley maintains an overweight rating on the shares and has set a price target of $97, suggesting a range-bound movement from the previous day's close.

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Moore acknowledged that the firm's initial estimates were likely too conservative, as the demand for GPUs has increased with the rising popularity of large language models. Recent conversations with industry contacts have bolstered his optimism in AMD's capabilities. Moreover, comments indicated stronger-than-expected pricing and opportunities to capture market share, even in the face of Nvidia's dominance in this market.

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While Moore expects Nvidia to vigorously defend its position, he noted that AMD is securing solid orders from customers and reaching a stage where these victories are more tangible than in previous product generations.

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