Morgan Stanley: Semiconductor earnings week preview—can server demand offset PC and smartphone weakness?

Can AMD’s server growth offset PC weakness?

Morgan Stanley expects it can. The bank cut its forecast for AMD’s fiscal 2027 client business from growth of 3% to a decline of 7.3%, while raising its server revenue growth forecasts for fiscal 2026 and 2027 from 82% and 75% to 88% and 79%, respectively.
The upward server revision slightly exceeds the client downgrade: the bank forecasts fiscal 2027 total revenue of 89.134 billion dollars, up from 88.987 billion dollars previously; non-GAAP earnings per share were raised from 15.54 dollars to 15.64 dollars.
The bank raised its AMD price target from 465 dollars to 510 dollars and maintained its Equal-weight rating. It shifted the valuation target year to 2028 and applied an earnings multiple of approximately 22 times, reflecting greater confidence in multiyear server CPU growth.

Morgan Stanley believes AMD’s chiplet design allows some less critical chips to use more mature processes and also allows wafers to be redirected from PC products to servers. Venice’s compute chiplets use TSMC’s 2-nanometer process, while the input/output chip, which accounts for about 40% of the silicon area, uses N6.
The bank’s team expects Venice shipments to rise from 1 million chips in 2026 to 4.4 million in 2027; however, advanced-node wafers and packaging substrates remain constrained, with less visibility into substrate supply.
GPUs may have a greater impact on AMD’s long-term earnings than server CPUs. The bank forecasts data center GPU revenue of 38 billion dollars in 2027, but the first large-scale rack deployments have yet to occur, and competition from Nvidia and custom chips remains; the issuance of warrants could also offset incremental GPU profits.

Astera Labs’ Scorpio X has entered mass production. Morgan Stanley expects Scorpio revenue to grow approximately 35% quarter over quarter in the quarter ending December 2026 as Trainium 3 continues to ramp, bringing company revenue to 651 million dollars, slightly below the market consensus of 656 million dollars.
The bank forecasts 2027 revenue of 2.95 billion dollars, assuming that the ramp-up of optical interconnect and CXL products is weighted toward the second half. Sustained growth still depends on the timing of new products and customer concentration in Amazon; for Trainium 4, Astera has an incumbent supplier advantage, but Marvell also says it has made progress.
Navitas’s main gallium nitride opportunity for 800V racks has been pushed back to the Feynman platform in 2028; Infineon is working with Nvidia, while Navitas has yet to secure a formal design win, increasing competitive pressure. Although the acquisition of Claros expands its serviceable market, it is expected to take two to three years to make a significant contribution.

Morgan Stanley believes AI demand and a cyclical recovery in the automotive and industrial sectors could further tighten mature-node supply in 2027. GlobalFoundries’ capacity utilization has reached the high eighties, and customer inventories are relatively lean.
However, some integrated device manufacturers still have idle capacity, and there has been no clear inventory replenishment in sectors such as automotive; price increases for comparable products remain modest for now. Foundry prices may gain stronger support if longer lead times prompt customers to increase inventories.
GlobalFoundries guides for communications infrastructure and data center end-market revenue to grow 50%–60% year over year; the bank expects growth of 58% in 2026 and a further 40% in 2027. Further expansion is constrained by capacity, and the company is adding and upgrading capacity.

Skyworks completed its acquisition of Qorvo on 5 October 2026. Morgan Stanley expects combined revenue of 1.936 billion dollars in the quarter ending December 2026, with Qorvo contributing approximately 862 million dollars; management aims to achieve more than 500 million dollars in annualized cost synergies within 24 to 36 months.
The bank is positive on the combined product mix but maintains an Equal-weight rating on Skyworks: smartphone business prices are fixed during product cycles, so rising input costs squeeze margins, while higher memory costs also pressure smartphone pricing and demand.
For Qualcomm, the bank expects a declining share of Apple’s business to bring revenue down to a year-over-year decline of 16.1% in the quarter ending December 2026. Meanwhile, it expects data center revenue of approximately 600 million dollars for the quarter and approximately 5 billion dollars for fiscal 2027; early custom chips have lower gross margins, and gross profit growth is expected to lag revenue growth.