Semiconductor company Advanced Micro Devices keeps delivering "positive proof points," according to Morgan Stanley, which says its cautious forecast was "the wrong call."

Morgan Stanley upgraded AMD to equal weight from underweight and raised the price target to $28 from $17. The bank said AMD has consistently performed well among its competitors Intel and Nvida.

AMD shares rose 3.2% in early trading Thursday.

"Being cautious on the stock has obviously been the wrong call, even though we were right on some aspects," Morgan Stanley analyst Joseph Moore said in a note to clients Thursday. "While our earnings concerns over the last 12 months have played out ... the table is set well for 2020 and there are positive near-term catalysts."

Morgan Stanley stills thinks there is "too much short-term optimism on the stock," but not enough to justify remaining underweight given AMD's key value drivers. AMD's gaming console business and its successful execution of product road maps are growth drivers in the stock, Moore said.

Moore said cloud gaming continues to be a key catalyst for the semiconductor company. Morgan Stanley expects AMD to announce a gaming partnership with Microsoft. Additionally, AMD continues to find creative ways of "monetizing a graphics chip that still appear to lag behind NVIDIA's state of the art" chips, Moore said.

Morgan Stanley said that in 2020, AMD will drive revenue growth from 12.2% to 21% and earnings per share up from 76 cents to $1.01, which is in line with consensus. The bank also raised its multiple assumptions from 23x to 28x.

AMD, which was the best performing stock in the in 2018, is up over 88% in the last 12 months and 59% this year.

— With reporting from CNBC's Michael Bloom