Memory Chipmaker Micron Technology Poised for a Comeback
Despite delivering solid results in recent quarters, Micron Technology’s stock has underperformed, gaining only 20% in 2024. However, with the company set to release its fiscal 2025 first-quarter results on December 18, things might be about to change.
Cyclical Market Trends
Micron Technology specializes in manufacturing memory chips for computing and storage, a market historically prone to fluctuations based on demand for personal computers and smartphones. Last year, the global memory market plummeted 39% due to a 4.4% drop in device shipments. However, the industry has been in recovery mode this year, driven by catalysts such as artificial intelligence (AI).
AI-Driven Growth
The increasing adoption of AI is driving a surge in memory consumption across multiple areas, including data centers, smartphones, and PCs. For instance, the usage of high-bandwidth memory (HBM) in AI chips has grown rapidly, with companies like Nvidia integrating this type of memory to make their AI accelerators more powerful. This trend is expected to benefit Micron, which has already been supplying HBM chips to Nvidia.
Nvidia’s Blackwell Production Ramp-Up
Nvidia’s latest quarterly results revealed a stronger-than-expected production ramp-up of its Blackwell GPU, which is equipped with 192 gigabytes of HBM. This could help Micron deliver better-than-expected results, as Nvidia is on track to exceed its previous Blackwell revenue estimate of several billion dollars.
Growing Memory Market
The global memory market is expected to generate $163 billion in revenue this year, up significantly from $92 billion last year. Micron seems poised to deliver impressive guidance, with the size of the memory market expected to jump to $204 billion in 2025. HBM is set to play a central role in this market’s growth, with Micron anticipating $25 billion in revenue next year, up from $4 billion in 2023.
Additional Catalysts
New catalysts such as the incoming PC refresh cycle and growth in the smartphone market could give Micron an additional boost. IDC estimates that the global PC market could show 4.3% growth in 2025, following a flat performance this year. Meanwhile, global smartphone sales are expected to grow in the low single digits next year.
Analysts’ Expectations
Analysts expect Micron’s revenue to jump 84% year over year to $8.71 billion in the first quarter of fiscal 2025, with a profit of $1.77 per share. Those numbers are well within Micron’s guidance range. Stronger demand from the likes of Nvidia could help Micron beat consensus expectations, sending the stock soaring following its quarterly report.
Valuation
Micron’s incredibly cheap valuation means that investors are getting an incredible deal on the stock right now. The chipmaker is trading at just 12 times forward earnings, with a price/earnings-to-growth ratio (PEG ratio) of 0.17, indicating that it is undervalued with respect to the growth it is expected to deliver.
A Top Growth Stock
Micron Technology seems set to soar higher this month and next year, making it a top growth stock that investors can consider buying. With its strong fundamentals, growing memory market, and cheap valuation, Micron is an attractive option for those looking to invest in the tech sector.
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