The chipmaker's latest results suggest that it's getting a solid AI-powered boost.
Nvidia (NASDAQ: NVDA ) has played a major role in the spread of artificial intelligence (AI) technology with its graphics processing units (GPUs), which are being deployed in data centers to train large-scale language models (LLMs) such as ChatGPT. , which has led to tremendous growth. In the income and earnings of the company.
As a result, Nvidia shares have set the market on fire in the past year, nearly tripling in price. That explains why Nvidia stock is now trading at 72 times forward earnings. However, there's another company that's seeing huge increases in revenue and earnings thanks to the growing adoption of AI, and it's much cheaper than Nvidia.
Micron Technology (MU -3.81%) It released its fiscal 2024 third quarter results (for the three months ended May 30) on June 26, and the company reported a big jump in revenue and earnings. Let's see how AI is supercharging Micron's growth and check if Nvidia is a better AI stock to buy now.
Micron Technology is stepping on the gas.
Micron's fiscal quarter revenue rose an impressive 81% year-over-year to $6.8 billion. More importantly, its non-GAAP (generally accepted accounting principles) net income for the quarter was $0.62 per share, compared to a loss of $1.43 per share in the same quarter last year. A memory specialist's guidance indicates that its development is about to accelerate.
More specifically, Micron expects revenue of $7.6 billion in the current quarter, in the middle of its guidance range. This would be a 90% increase over its top line in the same period last year, which means it is poised to grow at a faster pace in the current quarter. The midpoint of the company's $1.08 earnings guidance also marks a significant turnaround from the loss of $1.07 per share in the year-ago period.
Micron's strong growth can be attributed to healthy demand for memory chips from various sectors such as smartphones, personal computers (PCs) and data centers, all of which are getting an AI-driven boost.
For example, in the data center business, Micron sold $100 million worth of high-bandwidth memory (HBM) chips last quarter. These HBM chips are used in AI graphics cards to provide more bandwidth and computing power. The good news is that Micron expects its HBM revenue to grow from “several hundred million dollars” in the current fiscal year to “several billion dollars in revenue” in fiscal 2025.
HBM will be a long-term growth driver for Micron thanks to healthy demand for AI graphics cards. Additionally, Micron's data center storage business is also getting a boost thanks to growing demand for AI training and inference, which has led to increased demand for solid state drives (SSDs). This, again, presents a secular growth opportunity for Micron, as the global data center SSD market is expected to reach $133 billion in revenue in 2032, up from $37 billion last year.
Meanwhile, AI is also poised to fuel strong demand for memory chips in the smartphone and PC markets. On its latest earnings conference call, Micron management pointed out that AI-powered PCs are “expected to have 40% to 80% more DRAM content than today's average PC.” The company adds that these PCs are also likely to be equipped with larger storage capacities.
As for smartphones, Micron says this year's AI-powered smartphones will carry 50% to 100% more dynamic random access memory (DRAM) than last year's flagship phones. Thanks to these catalysts, it wouldn't be surprising to see global memory market revenue grow to $321 billion in 2030, up from $193 billion last year, according to Fairfield Market Research.
All of this explains why analysts are predicting Micron to grow at a tremendous pace in the coming years, even surpassing Nvidia's projected growth.
Buying this memory stock on Nvidia seems like a no-brainer.
Micron ended its last fiscal year with revenue of $15.5 billion. It is expected to end the current fiscal year with revenues of $25 billion, up 61 percent from last year. Nvidia's top line, on the other hand, is expected to reach $120 billion this fiscal year from $60.9 billion last fiscal year. So expect Nvidia to grow faster than Micron this year.
However, as the chart indicates, Micron's revenue could grow another 50% next fiscal year, well ahead of Nvidia's forecasted growth.
Moreover, Micron's revenue is expected to grow at a much faster rate than Nvidia's over the next few fiscal years.
Given that Micron Technology is trading at just 19 times forward earnings, a steep discount to Nvidia's forward earnings multiple of 48, it seems like a no-brainer AI stock to buy right now, as it Not only is it significantly cheaper, but it has the potential to outperform its classy counterpart.