In the realm of artificial intelligence, a quiet giant is emerging from the shadows. While Nvidia’s dominance in AI chip development is well-documented, Micron Technology is quietly making waves as a leading supplier of memory and storage chips. These components are essential for developing AI models in data centers and processing AI workloads in computers and smartphones.
Micron’s latest financial results reveal incredible growth across its entire business, driven by AI-driven demand. Its stock may be down 21% from its all-time high, but this dip presents a prime buying opportunity. The company’s memory chips are complementary to Nvidia’s data center GPUs, storing information in a ready state for instant access. Micron’s HBM3E solutions boast up to 50% more capacity than competitors while consuming 20% less energy.
The market for HBM in the data center is expected to surge from $4 billion in 2023 to $25 billion in 2025, a staggering 525% increase. Micron is already working on HBM4E, which will offer a substantial leap in capacity to power the next stage of the AI revolution.
Beyond the data center, Micron is poised to benefit from the growing demand for AI-enabled personal computers and smartphones. The average DRAM content in PCs has increased from 12 GB to 16 GB, with premium models featuring up to 64 GB. Similarly, Android smartphone manufacturers are fitting their devices with twice the DRAM capacity of last year’s models.
Micron’s revenue growth is accelerating, with a 93% increase in Q4 and a forecasted 85% year-over-year growth in the upcoming fiscal 2025 first quarter. The company’s gross profit margin has also seen a significant jump, contributing to a sharp increase in earnings per share.
With a forward price-to-earnings ratio of 12.6, Micron’s stock appears undervalued compared to Nvidia’s forward P/E ratio of 31.3. As AI demand continues to drive growth, the valuation gap between the two stocks is likely to narrow. With a consensus price target of $157.71, Micron’s stock has significant upside potential. Now may be the perfect time to buy into this semiconductor giant.
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