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Micron vs. Nvidia: why Micron might be the smarter AI investment

by August 14, 2024
written by August 14, 2024

Micron stock looks relatively flat in the last year when one looks at the stock price. However, the stock has had its fair share of volatility.

At one point, it was up over 85% for the and after the peak in June, it went down as much as 40%.

The volatility wasn’t just restricted to Micron. Other tech stocks faced a similar fate, especially ones related to the semiconductor industry.

However, there was an overreaction in Micron’s case which makes it worth taking a deeper look at the stock.

Despite that volatility, there doesn’t seem to be much wrong with the fundamentals of the company.

The Q3 earnings showed a healthy performance, with the revenue nearly doubling YoY to $6.81 billion.

The sell-off was partly because of a guidance that was as per analyst estimates while most people were expecting improved guidance.

Growing with Nvidia

Nvidia’s latest Blackwell AI systems use about 33% more HBM(High Bandwidth Memory) content. This gives Micron a unique advantage as it provides the HBM to Nvidia. In other words, as Nvidia grows, Micron grows.

Micron’s 2024 capacity for HBM was already sold out a few months ago. And most of its 2025 supply is also already booked. This gives the company the pricing power to gain from future growth in the segment.

Growth in the data storage market

The worldwide data storage market is currently valued at just about $220 billion. However, thanks mainly to generative AI, this market is expected to reach $774 billion by 2032.

This is a CAGR of 17.1% and Micron is well-poised to take a good chunk of this growth.

As with any market segment providing infrastructure for AI, this growth is coming from investments in data centers.

After Covid, companies are looking at agile ways of storing their data so data centers rely on cloud storage providers for storage.

Moreover, generative AI models have prompted companies to reevaluate their storage architectures to store the vast amount of new and complex data that is created. All this investment is likely to help the data storage market grow.

Is the stock a buy?

Micron stock is down 36% from its recent highs hit just in June. The stock has certainly over-corrected, which is one reason why it is at a much more attractive valuation currently.

Source: TradingView

Nvidia stock also had a similar downturn, however, the most dominant chip stock in the industry did not take much time to recover more than half of those losses.

The over-correction puts Micron in an interesting position and even though it is not the market leader in AI, its stock is poised to surge once future investments in AI trickle down to its bottom line.

It is therefore a better buy in the current scenario than Nvidia.

The post Micron vs. Nvidia: why Micron might be the smarter AI investment appeared first on Invezz

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