11:59 AM EDT, 06/10/2024 (MT Newswires) -- Advanced Micro Devices ( AMD ) appears expensive relative to other major artificial intelligence-focused companies Nvidia ( NVDA ) and Broadcom ( AVGO ) , with "limited" upward revision potential for AI likely, Morgan Stanley said Monday.

"We like the AMD story, but investor expectations for the AI business still seem too high to us," the brokerage said in a note. Morgan Stanley has more confidence on upward revisions to its AI outlooks for Nvidia ( NVDA ) and Broadcom ( AVGO ), according to the note.

However, the firm said it expects AMD to see "material" share gains in server and field-programmable gate array in the next 18 months, with the highest conviction in servers.

"We continue to see AMD as increasingly well positioned in their core markets, but persistently high AI expectations make us more cautious on their ability to justify a premium multiple," Morgan Stanley said.

The brokerage expects customers to back AMD, with Nvidia ( NVDA ) concentrating on protecting its market position and adopting a more competitive pricing strategy and AMD sharing a product release plan earlier this month. AMD unveiled the latest Instinct MI325X accelerator and the AMD Instinct MI350 lineup, slated for release in Q4 and 2025 respectively.

The brokerage downgraded its rating on the AMD stock to equal-weight from overweight while keeping its $176 price target unchanged.

The company's shares were down nearly 3% in recent trading.

Price: 163.13, Change: -4.74, Percent Change: -2.82