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This Artificial Intelligence (AI) Stock Has Quietly Outperformed Nvidia All Year
This Artificial Intelligence (AI) Stock Has Quietly Outperformed Nvidia All Year

Globe and Mail

time16-07-2025

  • Business
  • Globe and Mail

This Artificial Intelligence (AI) Stock Has Quietly Outperformed Nvidia All Year

Key Points The explosive increase in demand for high bandwidth memory chips has been a major catalyst for Micron. The company is well positioned to capture a significant share of the $130 billion high bandwidth memory market. Micron has transformed itself from a cyclical memory producer into an AI infrastructure player. Semiconductor giant Nvidia continues to be a Wall Street favorite -- and for all the right reasons. The company's transition from a prominent GPU company to a full-stack artificial intelligence (AI) infrastructure provider has been genuinely exceptional. Its full-stack solution includes its Hopper and Blackwell architecture chips, AI-optimized networking interconnections, and a robust software ecosystem. As cloud services providers and enterprises invest heavily in building and expanding their AI infrastructure, Nvidia is well positioned to benefit. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » As of July 10, Nvidia's shares were up 22.2% in 2025. However, a few AI-powered stocks that are less famous have significantly outperformed it year to date. Among them is Micron Technology (NASDAQ: MU), which is up 46.2% in 2025. While many investors appreciate this business, few seem to understand all the growth catalysts that will drive its share price performance. Where Micron's growth will come from AI is fundamentally transforming Micron's business model and its growth trajectory. In its fiscal 2025 third quarter (which ended May 29), the company's data center revenues more than doubled year over year and reached record levels, as high bandwidth memory (HBM) and storage are becoming increasingly critical for supporting complex AI workloads and applications. Micron's HBM revenues were up by around 50% sequentially, and the business has reached an annual run rate of more than $6 billion. Bloomberg Intelligence has estimated that from 2023 to 2033, the HBM chip market will grow at a compound annual rate of 42%, from $4 billion to $130 billion. That exceptionally rapid growth outlook is based on the fact that increasingly complex AI models require higher amounts of low-latency memory, and the expectation that many enterprises will transition from high-performance computing to advanced AI applications. To capitalize on this opportunity, Micron has been actively shifting more of its production capacity to advanced HBM architectures that offer higher memory capacity and bandwidth. With Micron being one of the only three global HBM providers (SK Hynix and Samsung are the other two), the company expects its HBM market share to be equal to its DRAM share by the second half of 2025. Micron is also seeing strong momentum in the market for data center and client SSDs (solid state drives). It recently became the No. 2 brand in data center SSDs for the first time. Additionally, the company stands to benefit from increasing memory demand in the PC segment, fueled by a Windows 11 upgrade cycle and the growing adoption of AI-enabled PCs across the world. Technology leadership and manufacturing expansion Micron's 1-gamma DRAM technology node leverages the most advanced semiconductor manufacturing technology -- extreme ultraviolet (EUV) lithography, which uses shorter wavelengths of light to pattern integrated circuits on silicon wafers. That allows each feature of a chip to be smaller, meaning more transistors can be squeezed onto each chip. For Micron, applying this advanced technology has led to a 30% improvement in bit density (higher memory storage in the same physical space), a 20% reduction in power consumption, and as much as 15% higher performance (faster data movement) compared to its previous 1-beta node technology. The company is also planning to invest about $200 billion in expanding its U.S. footprint over the next 20-plus years -- putting $150 billion into its manufacturing infrastructure and $50 billion into research and development. The story of the numbers Micron Technology delivered a stellar performance in its fiscal third quarter, with record revenues of $9.3 billion (up 37% year over year) and non-GAAP diluted earnings per share (EPS) of $1.91 (up 200%). Both figures topped the company's guidance and Wall Street's consensus estimates. For its current quarter, Micron is guiding for revenues in the range of $10.4 billion to $11 billion, and a gross margin in the range of 41% to 43%. Despite the stock's 46% gain year to date (at the time of this writing), there seems to be a disconnect between its share price and the company's fundamentals. The stock trades at just 22.5 times trailing earnings and 11.8 times forward earnings -- a significant discount to the Nasdaq-100 price-to-earnings ratio of 33.9. While that low P/E may be due to investors' recognition of the memory industry's well-established cyclicality and their skepticism about the sustainability of AI-driven memory demand, the degree to which the stock is being discounted for that seems excessive. Micron is gradually transforming from a commodity memory producer to a leading AI infrastructure player. The company has already entered into HBM contracts with some key clients that provide pricing transparency and demand visibility not seen in traditional memory contracts. In light of all that, the company may soon witness a valuation multiple expansion that drives up its share price. Considering these catalysts, Micron seems like an appealing stock pick now. Should you invest $1,000 in Micron Technology right now? Before you buy stock in Micron Technology, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Micron Technology wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $679,653!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,046,308!* Now, it's worth noting Stock Advisor's total average return is 1,060% — a market-crushing outperformance compared to 179% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 15, 2025

Micron Forecast Draws Muted Response Following 2025 Stock Rally
Micron Forecast Draws Muted Response Following 2025 Stock Rally

Yahoo

time25-06-2025

  • Business
  • Yahoo

Micron Forecast Draws Muted Response Following 2025 Stock Rally

(Bloomberg) -- Micron Technology Inc., Wall Street's favorite chipmaker this year, delivered an outlook that wasn't quite rosy enough to keep its 2025 rally going. Bezos Wedding Draws Protests, Soul-Searching Over Tourism in Venice US Renters Face Storm of Rising Costs US State Budget Wounds Intensify From Trump, DOGE Policy Shifts Commuters Are Caught in Johannesburg's Taxi Feuds as Transit Lags Mapping the Architectural History of New York's Chinatown Though the company posted third-quarter results and a fourth-quarter forecast that exceeded estimates, the stock pared gains in late trading after a conference call with executives. A key focus was high-bandwidth memory, a component used in artificial intelligence computing. The technology is fueling a sales surge at Micron, but the company didn't predict the kind of runaway growth that some investors were looking for. The sales gains 'while impressive, still roughly parallel our prior expectations,' Matt Bryson, an analyst at Wedbush Securities, said in a note. After initially gaining as much as 7.7% following the release of Micron's earnings report, the stock briefly turned negative. It was little changed as of 6:50 p.m. in New York. High-bandwidth memory, or HBM, has become the star of Micron's business. It's used in machines that develop and run AI tools. The company expects continued growth from that market as such software becomes more complex, requiring bigger amounts of memory. The company is also starting to recover from narrower profit margins in the previous quarter. On the conference call, analysts peppered Chief Executive Officer Sanjay Mehrotra with questions about HBM, trying to get a sense of how much growth is coming. The mismatch in expectations overshadowed a strong report. Fiscal fourth-quarter revenue will be roughly $10.7 billion, the company said. That was well ahead of the $9.89 billion average analyst estimate. Profit will be around $2.50 a share, excluding certain items, compared with a projection of $2.03. Sales rose 37% to $9.3 billion in the fiscal third quarter, which ended May 29. Analysts had estimated $8.85 billion. Earnings were $1.91 a share, excluding some items, compared with an average prediction of $1.60. In addition to pursuing more AI revenue, Boise, Idaho-based Micron is looking to sell more memory to other areas, such as electric vehicles and gaming chips, according to Dan Morgan, senior portfolio manager at Synovus, said in an earlier note. The growth prospects had turned Micron into the chip industry's hottest stock this year, with the shares gaining 51% through Thursday's close. --With assistance from Ian King. Inside Gap's Last-Ditch, Tariff-Addled Turnaround Push How to Steal a House Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Apple Test-Drives Big-Screen Movie Strategy With F1 Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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