Morgan Stanley upgraded Qualcomm to Equal-weight from Underweight and raised its price target to $231 from $146 in a client note after the chipmaker's investor day disclosed a management forecast of $5 billion in data center revenue for fiscal 2027 - a projection the bank said "clearly pushes them into the AI beneficiaries category."
In the note, analyst Joseph Moore conceded the firm had underestimated Qualcomm's AI prospects. "We have been wrong to be skeptical," Moore wrote, and said management's $5 billion revenue forecast for next year is "at least 2x higher than expected."
While the 2027 number prompted the rating change and target increase, Morgan Stanley expressed skepticism about a longer-term aim laid out by Qualcomm. The bank described the company’s $15 billion data center revenue goal for fiscal 2029 as "more aspirational," signaling caution about the path to that level.
Execution risk was a key concern highlighted by the bank. Morgan Stanley pointed to uncertainty around the accelerator opportunity and the company's plan to enter the server CPU market. It noted that a mid-2028 entry into CPUs "may not meet with the reception that it would have today" because supply from rivals is expanding quickly, including offerings from NVIDIA, AMD, Intel and cloud providers' custom silicon.
Moore stopped short of recommending an Overweight rating. He said the firm saw "better value from the dominant players vs more speculative new entrants," and remained "mindful of smartphone headwinds." Those considerations, along with competitive dynamics and product roadmap questions, kept the bank from taking a more bullish stance despite the upgrade.
Nevertheless, Morgan Stanley emphasized factors that made the upgrade difficult to resist. The note cited Qualcomm's "credible management team" and the company's year-to-date underperformance relative to other AI winners. In the bank's view, those elements, combined with the new revenue forecast, warranted moving the stock to Equal-weight in what it described as "the current narrative driven market."
Context and implications
The decision to lift the rating and price target reflects a recalibration of Morgan Stanley's view after management presented a materially higher near-term revenue target for data center operations. The bank balances that upward revision with concerns about competitive supply, timing of product entries, and broader demand pressures in smartphones.
The note repeatedly framed the $5 billion fiscal 2027 figure as a turning point for how Qualcomm is viewed among AI beneficiaries, while treating the $15 billion by fiscal 2029 target as less certain.
Key takeaways:
- Morgan Stanley upgraded Qualcomm to Equal-weight from Underweight and raised the price target to $231 from $146 after a $5 billion fiscal 2027 data center revenue forecast.
- Analyst Joseph Moore admitted the firm had been wrong to be skeptical and labeled the 2027 forecast "at least 2x higher than expected," but called the $15 billion 2029 target "more aspirational."
- The bank flagged execution risk in accelerators and server CPUs, noting a mid-2028 CPU entry "may not meet with the reception that it would have today" amid growing supply from NVIDIA, AMD, Intel and cloud providers' custom silicon.
Risks and uncertainties:
- Execution risk on accelerator and server CPU products, which could affect data center revenue trajectory and adoption timelines.
- Competitive pressures from established chipmakers and cloud providers' custom silicon that may limit market reception for new Qualcomm server products.
- Smartphone market headwinds that Morgan Stanley cited as a reason to refrain from an Overweight rating, impacting overall company performance.
Bottom line
Morgan Stanley's upgrade and sizable price-target increase reflect a reassessment of Qualcomm's near-term data center opportunity after management's forecast. The bank nevertheless highlights meaningful execution and competitive risks, and stops short of a more bullish rating given valuation preferences and smartphone industry pressures.