Morgan Stanley upgrades Qualcomm after $5B data center forecast

Investing.com -- Morgan Stanley upgraded Qualcomm to Equal-weight from Underweight and increased its price target to $231 from $146 in a note to clients on Thursday after the chipmaker's investor day revealed a $5 billion data center revenue forecast for fiscal 2027 that the bank said "clearly pushes them into the AI beneficiaries category."

In a note by analyst Joseph Moore, Morgan Stanley acknowledged it had been wrong to remain skeptical of Qualcomm's AI ambitions.

"We have been wrong to be skeptical," Moore wrote, adding that management's $5 billion revenue forecast for next year is "at least 2x higher than expected."

The bank was more cautious on Qualcomm's longer-term target of $15 billion in data center revenue by fiscal 2029, describing it as "more aspirational."

Morgan Stanley also flagged execution risk around the accelerator opportunity and server CPUs, noting that a mid-2028 entry into the CPU market "may not meet with the reception that it would have today" given rapidly expanding supply from competitors including NVIDIA, AMD, Intel and cloud providers' custom silicon.

Moore stopped short of an Overweight rating, citing better value elsewhere. "We simply see better value from the dominant players vs more speculative new entrants, and we remain mindful of smartphone headwinds," he wrote.

Despite lingering questions on the product roadmap, Morgan Stanley said Qualcomm's credible management team and year-to-date underperformance relative to other AI winners made the upgrade difficult to resist, particularly in "the current narrative driven market."

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