Advanced Micro Devices (NASDAQ:AMD) has gotten its AI mojo in order over the past few months, with the company now seen as poised to make headway in the data center GPU space.
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That is a big shift in investor sentiment from earlier this year, when the company was seen by some as having blown its chance of becoming a major player in the AI chip game.
Yet, interestingly, with the semi giant slated to report Q3 earnings today after the close, Morgan Stanley analyst Joseph Moore thinks the company is likely to deliver a strong readout, but that won’t be down to its GPU endeavors.
Rather, Moore, who ranks among the top 3% of Street stock experts, says investors should consider what is taking place in the traditional server market. CPUs have been in short supply for several months, partly due to Intel’s puzzling shortages and struggles in driving growth. But the severe shortages of hard disk drives, DDR5 DRAM, and enterprise SSDs indicate to Moore that overall component demand is “exceptional,” and traditional server builds “remain robust.”
Despite this strength, Intel’s growth has been weak and is likely to stay that way. Its data center segment grew just 0.4% year-over-year and 4.5% sequentially, remaining “supply constrained” at levels below seasonal expectations at least through 1Q26. While some of this may reflect Intel’s conservative approach, it’s clear to Moore that AMD will essentially “capture all of the growth in what is a very robust market.” This dynamic is likely to drive upside to Moore’s model, which currently projects server CPU growth of 5.3% quarter-over-quarter and 31.5% y/y in Q3, and 5.1% q/q and 21% y/y in Q4.
But obviously, what investors will be keen to find out is how GPU demand is shaping up. Here, Moore says “demand is fine, but we are not looking for near term upside.” The company should see “meaningful 3q/4q growth” as it rolls out new instances, but nothing that will significantly move the needle.
What really matters is the MI450, AMD’s rack-scale solution set to ship next year. It’s still too early to gauge market share, and while the OpenAI deal is “clearly an accelerant,” dependence on cloud providers to scale the six gigawatts introduces some uncertainty. To gain market share, says the analyst, AMD will need to deliver better ROI than Nvidia, but customers continue to have concerns about lower rack density and outstanding ecosystem challenges.
While Moore still believes the OpenAI deal “could be game changing,” the stock has risen more than 25% since the announcement. Additionally, one giant of a company stands in the way of further gains. “We expect a good quarter, and a positive outlook, into an analyst day that can deliver important proof points around MI450, but we’re still Equal-weight and prefer NVDA,” Moore explained. “The tide is rising quickly, and all boats in AI will rise with it, but growth disproportionately coming from non GPU could cap the multiple after the recent runup.”
That Equal-weight (i.e., Neutral) rating is backed by a $246 price target that implies shares are overvalued by ~4%. (To watch Moore’s track record, click here)
9 other analysts join Moore on the sidelines, but with an additional 29 Buys, the stock claims a Moderate Buy consensus rating. However, the $252.42 average target suggests the shares will stay rangebound for the time being. (See AMD stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.