Apart from NVIDIA stock there’s one other ignored AI stock in the marketplace which will have more room to run within the near-term.
Wall Street analysts are bullish on Micron Technology (NASDAQ:MU), a semiconductor stock that has been helped by the factitious intelligence boom — like NVIDIA.
Unlike NVIDIA though, Micron is trading at a comparatively low valuation, which implies this AI stock could surge within the second half of 2024 — and beyond.
Micron and its similarities to NVIDIA
Most of the leading semiconductor corporations occupy a selected area of interest inside the field. While NVIDIA produces graphics processing units (GPUs) for computers, video games, phones and other devices, Micron develops memory and storage semiconductor chips for computers, smartphones, and data centers, amongst other devices.
Just like NVIDIA, Micron’s revenue has been fueled by data centers, that are facilities that corporations and organizations use to store their applications and data. Micron’s data center revenue has been sparked by its high bandwidth memory (HBM) chips, which permit it to handle generative AI, or GenAI, data requirements.
The HBM3E chips are among the many fastest within the industry with the very best storage capability while consuming 30% less power than those from Micron’s competitors, reducing storage costs for clients.
Huge revenue growth
Revenue growth has been strong, as Micron detailed in its fiscal third quarter earnings report on June 26. Revenue increased 82% yr over yr within the quarter to $6.8 billion, while net income jumped to $332 million, or 30 cents per share, from a $1.9 billion net loss in the identical quarter a yr ago.
Within the quarter, Micron generated $100 million in revenue from its HBM3E chips for data centers. Micron President and CEO Sanjay Mehrotra sees more growth ahead.
“We expect to generate several hundred million dollars of revenue from HBM in fiscal 2024 and multiple billions of dollars in revenue from HBM in fiscal 2025,” Mehrotra said within the earnings statement. “We expect to realize HBM market share commensurate with our overall DRAM market share sometime in calendar 2025.”
Micron has the third-largest market share in DRAM, or dynamic random access memory chips, at around 23%. With Samsung and SK Hynix, the three control greater than 90% of the market.
Within the HBM space, Mehrotra said the chips are already sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of its 2025 supply.
“We’re making significant strides toward expanding our HBM customer base in calendar 2025, as we design-in our industry-leading HBM technology with major HBM customers,” the CEO said.
Why Micron has more upside right away
Micron stock plunged about 8% after the earnings release. While the corporate’s growth numbers were huge, they fell wanting analysts’ estimates.
The market also saw its guidance for the fourth fiscal quarter as barely disappointing, although it was consistent with estimates.
Nevertheless, this kneejerk negative response immediately post-earnings is definitely an excellent thing for investors since it is more based on too-high expectations. It also brings down the valuation.
That is why Micron now stands out as a greater option than NVIDIA stock, at the least within the short-term. Micron has a trailing P/E ratio of 10 and a forward P/E of 15, which makes it downright low-cost.
On the otherhand, NVIDIA’s valuation has exploded to 75, with a forward P/E of 49.
This difference is probably going why the consensus amongst Wall Street analysts calls for a Micron price goal of $165, which can be a 25% increase over the present price.
NVIDIA’s price goal is just $130, which might only be 3% higher than its current price.
Thus, this may be an excellent time to think about this AI stock apart from NVIDIA.