The Rise of AI: Why Micron Technology Is Poised to Outshine Nvidia
The rapid growth of artificial intelligence (AI) has become a game-changer for the semiconductor industry. As AI models require powerful chips to process vast amounts of data, companies like Nvidia have seen a surge in demand for their graphics processing units (GPUs). However, Micron Technology, a leading memory chip manufacturer, is also reaping the benefits of AI adoption.
Micron’s recent fiscal 2024 fourth-quarter results were impressive, with revenue jumping 93% year over year to $7.75 billion, exceeding analyst estimates. The company’s profit soared to $1.18 per share, a significant turnaround from a loss of $1.07 per share in the same period last year.
The demand for Micron’s data-center memory chips is outpacing supply, driven by the need for high-bandwidth memory (HBM) chips in AI-focused GPUs. The company expects the HBM market to reach $25 billion in 2025, up from just $4 billion last year. Micron has already sold out its HBM capacity for next year, indicating strong demand.
The adoption of AI is also driving growth in solid-state drives (SSDs) used in data centers, with Micron’s data center SSD revenue tripling in fiscal 2024. According to TrendForce, the deployment of AI servers is expected to drive 60% annual growth in data-center SSD demand in the coming years.
Moreover, the rise of AI-enabled PCs and smartphones is set to become another significant growth driver for Micron. The company’s CEO, Sanjay Mehrotra, noted that AI PCs require higher capacity memory and storage, with leading PC OEMs announcing AI-enabled PCs with 16GB to 64GB of DRAM. Similarly, Android OEMs are launching AI smartphones with 12GB to 16GB of DRAM, up from the average capacity of 8GB seen in 2023 flagship smartphones.
IDC estimates that the market for generative AI smartphones could grow at an annual rate of 78% through 2028, while Gartner predicts that AI PC shipments could jump 165% next year. This presents a multiyear opportunity for Micron to grow its sales and earnings.
Compared to Nvidia, Micron appears to be a more diversified AI stock, with exposure to multiple end markets beyond just data centers. Additionally, Micron’s forecast suggests that it is poised to clock faster growth than its peer. With a forward price-to-earnings ratio of 11, significantly lower than Nvidia’s forward-earnings multiple of 44, Micron looks like a more attractive investment opportunity right now.
Leave a Reply