Unlocking the Potential of Semiconductor Stocks
The artificial intelligence (AI) revolution has been a game-changer for the semiconductor industry, with top performers like Nvidia, Taiwan Semiconductor Manufacturing, and Broadcom leading the charge. However, not all chip stocks have shared the same success. Micron Technology, for instance, has seen its shares rise a modest 6% in 2024, leading some investors to question its potential.
Volatility and Expectations
A closer look at Micron’s price action throughout the year reveals a rollercoaster ride of peaks and valleys, with shares plummeting by 38% since June. So, what’s driving this volatility? In my opinion, it all comes down to expectations. Investors tend to apply the growth trends of industry leaders to other companies in the same sector, but this logic is flawed. Each business has its unique headwinds and catalysts, and Micron’s focus on memory and storage applications sets it apart.
A Missed Opportunity?
Micron’s forecast for a big miss in its 2025 fiscal second quarter sent investors running for the hills, but I believe this reaction is unwarranted. The company’s top-line growth and rising profitability are impressive, and its position in the AI realm is poised for significant upside.
The Rise of AI Infrastructure
As AI emerges as the next megatrend, companies like Nvidia and Advanced Micro Devices are developing chipsets capable of running complex algorithms at high speeds. Taiwan Semiconductor manufactures these GPUs, while Broadcom supplies the necessary network infrastructure equipment. It’s no wonder these businesses have experienced abnormal growth during the past two years. But what about Micron? I believe the company is on the cusp of its moment, driven by the growing demand for memory and storage protocols.
A Record-Breaking Quarter
Micron’s 2025 fiscal first quarter saw data-center revenue increase by a staggering 400% year over year, reaching a record level. The company’s data-center segment now accounts for more than 50% of the business, underscoring the need for Micron’s memory chips. With the total addressable market for high bandwidth memory expected to reach $100 billion by 2030, I believe Micron has significant upside.
Valuing Micron
Using the PEG ratio to assess Micron’s value, I find that the company’s low PEG of 0.23 suggests it may be undervalued. As AI workloads become larger and more complex, the need for Micron’s services will become increasingly obvious.
A Bargain Opportunity
Buying Micron right now could be a bargain opportunity for investors with a long-term time horizon. Don’t miss out on the potential for spectacular growth in 2025 and beyond.
Leave a Reply