Demand for AI chips is surging and is expected to continue rising through the remainder of the decade.
Hyperscalers are focused on procuring memory and storage chips in addition to general purpose GPUs.
Micron Technology has benefitted from surging demand for memory chips, yet the stock trades at a steep discount.
10 stocks we like better than Micron Technology ›
Wall Street’s obsession with artificial intelligence (AI) stocks has helped fuel a historic bull market over the last few years. Megacap technology stocks in particular have witnessed pronounced valuation expansion throughout the AI revolution, which has contributed to some frothiness in the major indices.
As growth stocks roar higher, it’s becoming more challenging to find a good deal in the market. I’ve found one AI stock that stands out from the pack in this regard, though.
Last year, shares of Micron Technology (NASDAQ: MU) nearly tripled. This performance only adds to the company’s illustrious shareholder returns. Since its initial public offering (IPO) in 1984, Micron stock has gained about 28,700%.
While it may appear that Micron is turning into the market’s next momentum stock, I think its rally has only just begun. Let’s dig into what makes Micron such an integral piece of the AI ecosystem and analyze why the stock could be about to go parabolic.
Image source: Micron Technology.
When it comes to semiconductor stocks, smart investors understand that not all chips serve the same purpose.
Nvidia and Advanced Micro Devices design graphics processing units (GPUs) — the hardware on which generative AI models like ChatGPT are trained. By contrast, Broadcom helps the hyperscalers build custom silicon for specific workloads.
Micron operates in a completely different pocket of the chip landscape. The company specializes in high-bandwidth memory (HBM) and storage solutions. For much of its history, Micron played an integral role in the consumer electronics market — often benefiting from upgrade cycles in PCs and smartphones.
While Micron’s value proposition to the tech landscape was clear, the cyclical dynamics of consumer hardware was a blemish on the company’s growth potential. That narrative is swiftly changing thanks to the AI boom.
Over the last year, Micron’s revenue has kicked into a new gear. This acceleration underscores that AI developers are beginning to allocate larger portions of their capital expenditure (capex) budgets to memory and storage as opposed to just GPU procurement.
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