Nvidia and Micron Technology seem to be solid stock options to consider right now.
Even though markets are hovering near record highs, finding blue-chip stocks at bargain prices is becoming a bit tricky. Still, there are appealing investment opportunities if you know where to direct your attention.
It’s important to highlight the swiftly expanding realm of artificial intelligence (AI), which doesn’t appear to be slowing down anytime soon. Here are two promising AI stocks that deserve your consideration at this moment.
1. Nvidia
A key takeaway from this year’s earnings reports is that the battle for AI infrastructure isn’t ending just yet. Major hyperscalers—those operating large data centers—are allocating substantial budgets for capital expenditure this year to enhance their data center capabilities in order to meet the increasing AI demand.
Among the companies poised to gain from this is Nvidia. Its graphics processing units (GPUs) are still the cornerstone for AI infrastructure, and now the company is utilizing its networking assets to provide comprehensive server solutions.
Nvidia is facing heightened competition from custom AI chips, known as ASICs (application-specific integrated circuits). However, these specialized chips don’t possess the same flexibility and adaptability as GPUs do in a swiftly evolving AI landscape. On a positive note, Nvidia’s recent talent acquisitions and its technology licensing agreement with Groq is assisting in making strides in a world where AI inference is becoming increasingly vital.
With Nvidia stock priced at just 24 times its anticipated earnings, it’s considered a favorable buy at current prices.
2. Micron Technology
For optimal GPU performance, high-bandwidth memory (HBM) is crucial. This specific type of dynamic random access memory (DRAM) enables GPUs to retrieve and process data swiftly, preventing delays in performance.
As large-scale AI infrastructure ramps up, demand for HBM is surging. However, the production of HBM itself requires over three times the wafer capacity compared to standard DRAM, which constrains supply. This situation is consequently inflating DRAM prices as the demand keeps soaring.
A promising way to capitalize on this trend is Micron Technology, one of the leading DRAM manufacturers alongside South Korea’s SK Hynix and Samsung. Micron’s HBM production has already sold out. While the company is boosting its capital investment to address the high demand, the market is likely to remain quite constricted for the foreseeable future. Micron has already seen substantial revenue growth and strong profit margins as DRAM prices increase.
Given that Micron’s products are in the midst of a supercycle and its stock is trading at under 12 times projected earnings, it’s a strong buy at this point.
