AI Chip Stocks to Consider: A Specific Analyst on Wall Street Predicts a 85% Surge (Excluding Nvidia)
In the rapidly evolving world of technology, the demand for advanced GPUs has been on the rise, and so has the demand for high-bandwidth memory (HBM) chips. These chips, with their quick access to data for processing, are essential for keeping up with the growing demands of modern computing. One company at the forefront of this development is Micron Technology.
Micron's next-generation HBM4 chips are showing promising progress, with performance 60% higher than its HBM3E chips and 20% less power consumption. This advancement could significantly boost Micron's earnings, especially as the company aims to capture a 25% share of the HBM market by the second half of this year, equivalent to its total DRAM (general memory chips) market share.
However, the tech industry is not without its challenges. A downturn in demand could negatively impact Micron, as most of its products aren't significantly differentiated from those of SK Hynix or other competitors. Micron saw a significant shock to its earnings in 2023, with inventory levels rising and demand from China vanishing.
Despite these challenges, Micron remains an attractive investment option for those looking to capitalise on the growing spending of the hyperscalers without paying premium prices for expensive GPU chipmakers like Nvidia and AMD. Rosenblatt Securities has set a $200 price target for Micron, representing an 80% increase from its current price.
The long-term trends favor growing demand for memory, both in data centers, consumer devices, and automobiles, especially those with advanced computing capabilities like self-driving cars. The total infrastructure spending from the top 10 AI tech companies could climb from $435 billion last year to over $1 trillion by 2028.
SK Hynix, the current leader in the HBM market, is expected to face competition from Micron. SK Hynix has already sold out its entire capacity for 2025 by the end of the first quarter and is expected to finalize its 2026 volume within the first half of the year. Micron, on the other hand, is ramping up development on its latest generation HBM3E 12H product and expects it to be its biggest source of HBM shipments in the current quarter.
Analysts expect AMD's latest chip to compete for more share of data center spending against Nvidia, which bodes well for Micron. The most important component of AI data centers is the GPU cluster, with bigger clusters of more powerful GPUs capable of training bigger models faster. Micron's significant capital expenditures for equipment and capacity make it an extremely cyclical stock, but the strong expected growth in AI spending could provide a huge boost to Micron's revenue and profit margins over the next few years, as long as it maintains leading-edge technology with HBM.
In conclusion, while the tech industry presents challenges, Micron Technology's advancements in HBM technology and its potential to capture a significant share of the market make it an attractive investment option. The company's current valuation, less than 14 times forward earnings, is considered extremely attractive by Rosenblatt Securities, and the long-term trends favoring growing demand for memory make Micron a company to watch in the coming years.
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