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Morgan Stanley drops massive AMD stock price target after earnings

By Mwangi Enos TheStreet

Updated May 8, 2026 7:53 AM

You know that feeling when you've been backing a friend's idea for months, and then suddenly the whole room starts paying attention? That's roughly where Morgan Stanley finds itself with Advanced Micro Devices (AMD).

For the better part of six months, the firm had been quietly bullish on AMD's server CPU trajectory. The timing, as the analysts themselves admitted in a note shared with TheStreet, was "badly off." They called it their conviction pick three months ago, got the good CPU quarter they expected, and watched the stock sell off anyway.

Then came Q1 2026. And AMD CEO Lisa Su spoke bluntly.

"We are seeing strong momentum as inferencing and agentic AI drive increasing demand for high-performance CPUs and accelerators," she said during the earnings commentary.

Now Morgan Stanley is raising its price target, and explaining why the CPU story may have more room to run than the market has priced in.

Morgan Stanley raises AMD price target to $410 from $360

Morgan Stanley kept its equal-weight rating on AMD but raised its price target to $410 from $360, according to the note shared with TheStreet.

Here is the math. The analysts lifted their valuation multiple from roughly 32 times to 37 times CY27 non-GAAP EPS estimates, citing multiple expansion across the peer group, including Intel, and a stronger multiyear CPU outlook. Their CY27 EPS estimate now sits at $11.10.

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For the full year, Morgan Stanley forecasts AMD revenue of $48.807 billion and EPS of $7.22, according to the note.

The firm sees the CPU story as credible and gaining momentum. On AI and GPU, it remains watchful and wants to see the rack-scale launch deliver before changing that view. AMD stock was up in after-hours trading following the earnings release.

AMD's Q1 beat and why the numbers don't tell the whole story

AMD posted Q1 2026 revenue of $10.3 billion, up 37.8% year over year, according to a company statement. Non-GAAP earnings per share (EPS) came in at $1.37, ahead of Wall Street's consensus estimate of $1.28, according to a note shared with TheStreet.

The beat was broad-based, but the real story wasn't just what AMD delivered. It was what management said next.

AMD Segment results, according to the Morgan Stanley note:

Data Center: $5.775 billion, up 57.2% year over year
Client (PCs): $2.885 billion, up 25.8% YoY
Gaming: $720 million, down 14.6% quarter-over-quarter (QoQ) and up 11.3 YoY
Embedded: $873 million, up 6.1% YoY

Source: Morgan Stanley Note Shared With TheStreet

Gross margin came in at 55.4%, just above the Street's 55.1% estimate, according to the Morgan Stanley note. For Q2, AMD guided revenue to $11.2 billion at the midpoint, implying 9.2% sequential growth, above the consensus of $10.541 billion.

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Why Morgan Stanley doubled AMD's server CPU growth target

Here's where it gets interesting. Back in November 2025, AMD had laid out a five-year server CPU total addressable market (TAM) growth target of 18%. Management just revised that to 35%.

My review of the data suggests this isn't just a routine update. That's nearly doubling the long-term growth outlook in a single quarter.

Morgan Stanley attributes part of the current server shortage to Intel's (INTC) struggles - the rival posted 5% volume declines in Q1, according to the note. AMD, meanwhile, says it has the supply chain to meet demand and is still targeting the majority CPU market share by 2030, including against ARM-based competitors.

For Q2, AMD is guiding for more than 70% YoY growth in server CPU demand, well above Morgan Stanley's prior estimate of 66% and consensus closer to 50%, according to the note.

The GPU question AMD still hasn't answered

Not everything in the quarter was clean. GPU revenue was down sequentially in Q1 after China-related revenues dropped out of the model, according to the Morgan Stanley note. AMD guided GPU revenue up double digits in Q2, but declined to confirm whether that brings it back to Q4 levels.

The bigger question is the MI450 rack-scale launch in the second half of 2026. Morgan Stanley describes it plainly as a "show-me" story. Customer feedback so far has been inconclusive, as buyers want to test the racks before committing to hard numbers.

AMD CFO Jean Hu called out "record quarterly free cash flow" in the company statement. But for GPU bulls, that headline doesn't resolve the uncertainty around AMD's AI hardware positioning against Nvidia and custom chip vendors moving fast.

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This story was originally published May 8, 2026 at 7:37 AM.