In the field of artificial intelligence, choosing the best semiconductor is crucial to ensuring optimal performance. In the face of Nvidia, one stock emerges and sparks interest: but is it really more relevant for AI at the moment? Let’s explore this question to enlighten potential buyers.
Nvidia (NASDAQ: NVDA) has distinguished itself as a pioneer in the adoption of artificial intelligence (AI) technology through its graphics processing units (GPU), which are widely used in data centers to train large language models like ChatGPT. This advancement has dramatically boosted the company’s revenues and profits.
As a result, Nvidia’s stock has nearly tripled in value over the past year, which explains why it is currently trading at high prices, around 72 times its past earnings. However, another company is increasingly attracting attention due to the growing adoption of AI while displaying a much more attractive price than Nvidia.
Accelerating Growth of Micron Technology
Micron Technology (NASDAQ: MU) reported its third fiscal quarter results for 2024 on June 26, revealing a significant increase in its revenues and profits. For the quarter ended May 30, Micron’s revenues soared 81% year-over-year to reach $6.8 billion. Additionally, its non-GAAP net income stood at $0.62 per share, compared to a loss of $1.43 per share in the same quarter last year.
Micron’s forecasts indicate an acceleration in its growth. It anticipates revenues of $7.6 billion for the current quarter, representing a 90% increase compared to the same period last year. The midpoint of its earnings forecast of $1.08 also suggests a marked recovery compared to a loss of $1.07 per share a year earlier.
Growth Factors for Micron
Micron’s strong growth can be attributed to robust demand for memory chips across various sectors such as smartphones, personal computers (PC), and data centers, all of which benefit from an AI-powered boost.
- In the data center market, Micron sold $100 million worth of high bandwidth memory (HBM) chips last quarter. Used in AI graphics cards, these chips offer superior bandwidth and computing power.
- Micron expects to see its HBM revenues increase by “several hundred million dollars” this fiscal year to “several billion dollars in revenue” by fiscal year 2025.
- Micron’s growth is not solely dependent on HBM; the increasing demand for SSDs for AI training and inference is also boosting its data center storage sector.
Opportunities in the Smartphone and PC Markets
AI is also expected to increase demand for memory chips in the smartphone and PC markets. During its latest earnings call, Micron’s management pointed out that AI-equipped PCs are expected to contain up to 80% more DRAM memory compared to current PCs. Furthermore, these PCs are likely to have larger storage capacities.
For smartphones, Micron indicates that this year’s AI smartphones will contain between 50% and 100% more dynamic DRAM memory than last year’s flagship models. Thanks to these factors, the global memory market could reach $321 billion by 2030, compared to $193 billion in 2022, according to Fairfield Market Research.
Why Micron Seems a Better Choice Than Nvidia
Micron finished its previous fiscal year with revenue of $15.5 billion and is expected to end the current fiscal year with $25 billion in revenue, representing a 61% increase compared to the previous year. In comparison, Nvidia is projected to go from $60.9 billion to $120 billion in revenue this year, showing faster growth than Micron during this period.
However, estimates suggest that Micron’s revenue could still grow by 50% in the following fiscal year, surpassing Nvidia’s growth forecasts. Additionally, Micron’s profits are expected to increase at a much faster rate than Nvidia’s over the next two fiscal years.
Given that Micron is trading at only 19 times projected earnings, a significant gap compared to Nvidia which is trading at 48 times its projected earnings, it seems wise to consider Micron as a more advantageous AI investment right now, not least because it is significantly cheaper and has the potential to outperform its prestigious competitor.
