Rare Investment Opportunity: Top Artificial Intelligence (AI) Stock for Long-Term Growth

Rare Investment Opportunity: Top Artificial Intelligence (AI) Stock for Long-Term Growth

It’s been just over a year since the latest version of artificial intelligence (AI) went viral, and we’re just starting to see the fruits of this revolutionary technology. Early indications suggest that one of the biggest benefits will be the time and money saved from increased productivity as AI automates mundane and time-consuming tasks. Businesses of all types are exploring how best to adopt this technology, but it is still in its early stages.

Micron technology (NASDAQ:MU) CEO Sanjay Mehrotra has been clear about the long road ahead. “We are at the very beginning of a multi-year phase of growth driven by AI, as this disruptive technology will transform every aspect of business and society,” he said.

It’s a bold claim, but one that’s increasingly being echoed by the tech world’s brightest minds, although estimates of its value vary. Generative AI is expected to be a $1.3 trillion market by 2032, according to Bloomberg Intelligence. Global management consulting firm McKinsey & Company is more optimistic, estimating a range between $2.6 trillion and $4.4 trillion per year. What is clear, however, is that the opportunities are vast.

It’s also clear that Micron Technology stands to reap some of this growing AI windfall.

Rare Investment Opportunity: Top Artificial Intelligence (AI) Stock for Long-Term Growth

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Many ways to enjoy

Micron Technology may not be a household name, but the company provides a number of components essential to AI processing, particularly in data centers. Micron is a leading supplier of memory (DRAM) and storage (NAND) chips – and each of them helps accelerate performance of NvidiaGPUs from , which set the benchmark for data center processing.

In November, Nvidia announced that it had chosen Micron’s High Bandwidth Memory 3E (HBM3E) chip, which would be integrated into its H200 Tensor Core GPUs, providing “advanced memory to handle massive amounts of data for generative AI and workloads.” of high performance computing work”. ” according to the release. Nvidia went further, saying that the HBM3E helped improve the performance of the H200, which offered “nearly double the capacity and 2.4 times more bandwidth compared to its predecessor, the Nvidia A100 “.

These data center processors are expected to begin shipping in the second quarter of 2024. Last month, Micron announced that it had begun volume production of the HBM3E, which the company says delivers superior performance while using approximately 30% of less energy than competing offers.

As the number and size of data center workloads continue to increase, power consumption becomes a key factor, which was undoubtedly a factor when Nvidia chose Micron’s energy-efficient chips .

The Huge Opportunity of AI

AI’s tailwind is just starting to show in Micron’s results. For the company’s second quarter of fiscal 2024, which ended Feb. 29, Micron generated revenue of $5.82 billion, up 58% year-over-year. other and 23% sequentially. The company noted that growing demand “has led to large price increases.” This helped the cyclical chip company return to profitability sooner than expected, generating adjusted earnings per share (EPS) of $0.42.

Management expects the company’s growth to accelerate. For the third quarter, Micron forecasts revenue of $6.6 billion, which would represent year-over-year growth of 76%. At the same time, its adjusted EPS is expected to rise to $0.45.

Micron noted that its HBM supply was fully exhausted for calendar year 2024, as was the vast majority of its supply for 2025. This helps illustrate the growing demand created by the accelerated adoption of generative AI.

The ongoing cycle of data center upgrades helps meet this demand, as existing servers simply do not have the computing power to meet the demands of generative AI. Bernstein analyst Toni Sacconaghi crunched the numbers and suggests the AI ​​server market will see 75% annual growth over the next three years, calling the resulting upgrade cycle “without previous “. Additionally, as AI begins to expand from data centers to other devices, including personal computers and smartphones, demand for Micron’s other solutions is also expected to increase.

Excitement over the prospects of AI has propelled Micron Technology to new heights, with a commensurate increase in its valuation. That said, the stock still trades at around 4x next year’s sales. Although this is a premium compared to the multiple of 3 for the S&P500The growing demand for AI has led to unprecedented demand for Micron’s storage and memory solutions.

As a leading supplier of processors used to accelerate AI, Micron could represent a once-in-a-generation investment opportunity.

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Danny Vena has positions at Nvidia. The Motley Fool Ranks and Recommends Nvidia. The Motley Fool has a disclosure policy.

A Once-in-a-Generation Investment Opportunity: 1 Artificial Intelligence (AI) Growth Stock to Buy Now and Hold Forever was originally published by The Motley Fool

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