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The semiconductor industry is at the heart of the artificial intelligence (AI) revolution. We make advanced chips for data centers where developers build, train, and deploy AI models. Nvidia‘s (NASDAQ:NVDA) Graphics processing units (GPUs) are best-in-class for these applications.
Nvidia’s stock has more than tripled in the past 12 months, valuing the company at $2.2 trillion.only apple and microsoft It’s worth more.
Nvidia will likely continue to create value for investors. That’s why I was joking when I told you to forget about the company. But the AI industry is rapidly evolving, and many other stocks in the chip space are also surging. micron technology (NASDAQ:MU) The stock just hit an all-time high of $113.50, surpassing its all-time high two years ago. Here’s why it’s not too late to buy.
When it comes to AI, data centers aren’t the only game in town.
Micron is one of the world’s leading manufacturers of memory (DRAM) and storage (NAND) chips, both of which are increasingly important in extracting maximum performance from Nvidia’s data center GPUs. In fact, Nvidia selected Micron’s HBM3E memory solution to power his latest H200 chip, the successor to the industry-leading H100.
Micron’s HBM3E memory consumes an estimated 30% less energy than competing hardware, and as AI workloads demand vast amounts of computing power, reducing power usage is an increasing focus for data center operators. It has become. It’s no wonder, then, that Micron’s high-bandwidth memory (HBM) is completely sold out in his 2024 year, and most of the 2025 supply has already been allocated as well.
But Micron’s AI opportunities are now expanding beyond the data center. All new computers and mobile devices will soon be equipped with AI processors to speed up response times and improve the user experience. The chipsets inside next-generation computers are called neural processing units (NPUs) and are specifically designed to handle AI workloads. It requires up to 80% more DRAM content than today’s average PC chip, which translates to increased revenue for Micron.
In the mobile space, Micron expects AI-powered smartphones to have up to twice the DRAM content compared to traditional models. Micron’s AI chip powers Samsung’s new Galaxy S24 device, which has a number of AI features. One of his is Live Translate, which allows two people to speak on the phone in different languages, and the other is Circle, which recognizes objects in photos and allows users to instantly perform online searches. to Search.
On-device processing is the industry’s next frontier as it takes AI out of the data center and into everyday life. Demand is already skyrocketing. Advanced Micro Devices is a leader in AI CPU and NPU technology and has shipped millions of AI-enabled computers to date.
Micron turned profitable
Micron’s revenue fell 50% during fiscal year 2023 (ending August 31, 2023), and the company’s bottom line fell to a net loss of $5.8 billion for the year. Pandemic-related supply shortages have caused the chip industry to overproduce, leading to overstocks and plummeting prices.
Now, Micron has come out of that era. The company’s revenue returned to growth in the first quarter of fiscal 2024 (ending November 30, 2023), but the company still lost more than $1.2 billion to its bottom line. However, his recent fiscal 2024 second quarter (ending February 29, 2024) was a real breakout period for the company.
Micron had revenue of $5.8 billion, up 57% from a year earlier, and also missed the company’s expectations of $5.3 billion. Additionally, the company generated a net profit of $793 million, a welcome return to profitability.
CEO Sanjay Mehrotra said the strong quarter was due to tight supply and demand balance, which had a positive impact on prices across end markets. However, it also gave a nod to the strong demand for AI servers (data centers).
Micron expects sales of $6.6 billion for the upcoming fiscal third quarter of 2024 (ending June 1), an increase of 76% from the same period last year. If this happens, growth will accelerate significantly from the second quarter.
Why Micron stock is a buy even as it trades at all-time highs
Micron lost money through the second quarter, so investors can’t use the price-to-earnings ratio to value Micron’s stock. However, based on the company’s trailing 12-month sales of $18.3 billion and current market cap of $122 billion, Micron’s stock trades at a price-to-sales (P/S) ratio of 6.7x. .
This is very cheap compared to Nvidia stock, which trades at a P/S ratio of 37, and even Advanced Micro Devices stock, which trades at a P/S ratio of 12.9. These names deserve a premium because their efforts in the GPU, CPU, and NPU space are unprecedented and are effectively creating demand for Micron products.
But AI is expected to add $7 trillion to $200 trillion to the global economy over the next decade, and Micron’s hardware is a key component in unlocking that value creation. The company is accelerating its pace of innovation. The company is currently offering samples of its 12-high HBM3E data center product, which increases DRAM capacity by 50%. This means companies like Nvidia can put more memory on each GPU, leading to faster training and inference, paving the way for more advanced AI models.
Micron’s revenue growth is clearly accelerating, and the stock’s new all-time high shouldn’t deter investors from buying the company, especially considering its valuation and significant opportunities ahead. .
Should you invest $1,000 in Micron Technology right now?
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Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
The article “Forget Nvidia: Another super semiconductor stock just hit a new record high and it’s never too late to buy” was originally published by The Motley Fool.
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