Wall Street analysts are starting to worry about chipmaker Advanced Micro Devices following Intel's terrible earnings results . Intel badly missed on both top- and bottom-line estimates in its fourth quarter earnings release Thursday and gave a weaker-than-expected forecast that predicts more pain in the first quarter. Now, analysts are looking ahead to AMD's Tuesday earnings release and wondering if it might see similar weakness. Shares of the chipmaker were down nearly 2.5% in early trading Monday. "We expect near-term weakness in data center to weigh on the [first-quarter] outlook, and our initial assumption that the company can guide the full year to roughly consensus numbers might be at risk given Intel issues and new CFO," Morgan Stanley analyst Joseph Moore wrote in a Monday note. "But the opportunity remains significant." Morgan Stanley named AMD its top pick in December knowing that there would be some risk early in the year. "That risk does loom a bit larger given the recent upgrades, share price appreciation, and the surprising magnitude of inventory excess at competitor Intel," Moore said. "But we still think that full year numbers look reasonable, that the only near-term risk/uncertainty is around data center, with PC client, gaming, and embedded numbers already at reasonable levels. He added that AMD was the worst-performing large-cap semiconductor last year, but while end markets have been soft, the company's competitive position has continued to improve. Earnings expectations Even though Morgan Stanley expects a weak first-quarter guidance, it still has an overweight rating and $77 price target on AMD shares. "We believe estimates have come down materially, with consensus numbers forecasting declines of ~50% in the client business in 1H23, and then a return to a ~2019 run-rate in PCs, which we view to be conservative given the market share gains we have seen from AMD over the past several years," Moore said. Morgan Stanley models December revenue of $5.54 billion, down 0.4% on the quarter and up 14.8% on the year. Its estimate is just above the Street consensus of $5.5 billion. "We expect an in-line Q4 but weak Q1 outlook for AMD, following the shocking guidance from peer INTC on continued PC and server inventory concerns," analyst Vivek Arya of Bank of America wrote in a Sunday note. The bank added that this will be the first earnings call under incoming chief financial officer Jean Hu. Bank of America expects the AMD call to focus on the full-year sales growth outlook and address gross margins and the company data center. Bank of America maintains its buy rating on AMD given "share gain potential and attractive valuation vs INTC," Arya wrote. AMD 1Y line AMD one year Susquehanna is also expecting fourth-quarter results in the lower end of AMD's range and a disappointing first-quarter guide. "Our short-term thesis on AMD is as follows: OEMs are sitting on piles of unused Intel PC C CPU inventory and need to use them in upcoming builds, which should greatly skew market share against AMD, causing their CPU inventory issues to linger and sell-in to remain depressed," Christopher Rolland wrote in a Monday note. There are also some positives that will help boost AMD, including its Genoa chips. "While AMD is not immune to an enterprise slowdown, the performance gap of Genoa over Sapphire Rapids should allow AMD to overcome a softer backdrop," Rolland said. AMD has also surged nearly 30% since its last earnings report and outperformed the broader semiconductor index, which could mean the bar is set slightly higher for its performance, Rolland said. He maintained his positive rating on the stock. Positive outlooks Even though there is worry about AMD's performance, most analysts still have positive ratings on the stock. Morgan Stanley, Susquehanna and Bank of America all recommend buying the stock and see decent upside for shares. Overall, Wall Street consensus rates the semiconductor name a buy and sees a 20% upside from where currently shares trade, according to FactSet. "There is risk to numbers for almost all semis names, and this remains an intriguing growth narrative trading at the most reasonable price we have seen in a while," Morgan Stanley's Moore wrote. "We continue to see a long runway of potential data center gains, including potential to get traction in data center GPU over time."
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