We recently published a list of Top 10 Latest AI Stock News and Analyst Ratings. Since Micron Technology Inc (NASDAQ:MU) ranks 6th on the list, it deserves a deeper look.
The much-feared correction in mega-cap tech stocks is here as investors keep pulling out of AI winners to pile into small-cap stocks as possible rate cuts from the Federal Reserve near. Brent Thill, Jefferies tech research analyst, recently said while talking to CNBC that we are seeing a rotation inside the tech industry where semiconductor and internet companies are performing well while software companies are underperforming. However, Thill reiterated his view that in the back half of the year things will start to change and tech companies will start their rebound. The analyst cited a few software earnings that suggest no signs of “demand cracks.” He said that many semiconductor stocks are now in the overbought territory.
Brent Thill said the selloff has made software stocks more “attractive.”
But Thill also sees a broader rotation ongoing in the stock market, where sectors like financials and industrials are benefitting amid investor exodus from tech.
Asked what is causing a sudden rebound in small-cap stocks, Thill said that interest rate cut expectations and a broader rotation out of mega-cap stocks have a role to play here, in addition to the M&A activity which has increased significantly recently.
Thill thinks the AI “payoff” time is still years away and companies are still at the beginning of the AI spending curve.
For this article we compiled the biggest AI news updates and analyst rating upgrades/downgrades around AI stocks over the past few days. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Micron Technology Inc (NASDAQ:MU)
Number of Hedge Fund Investors: 115
Bank of America analyst Vivek Arya recently talked about the latest declines in semiconductor stocks. However, the analyst said most of the declines were due to temporary factors and fundamentals are still “intact.”
“AI still the strongest and most dependable area of capex, driven by domestic US tech companies with solid balance sheets, proven monetization and mission-critical imperatives…” Arya said.
Micron Technology Inc (NASDAQ:MU) posted quarterly results earlier in the month which came in better than expected but the market didn’t welcome the in-line guidance and rising expenses. However, this short-term view misses the fact that Micron Technology Inc (NASDAQ:MU) is investing heavily in high bandwidth memory (HBM) production that is expected to generate billions in sales by fiscal 2025 compared with just hundreds of millions in 2024.
After the earnings, BofA analyst Vivek Arya reiterated a Buy rating and gave a $170 price target on Micron Technology Inc (NASDAQ:MU).
“Mgmt emphasized both CY24 and CY25 volumes are now fully sold out with pricing generally secured, providing visibility to its healthy sales and margin expansions (HBM is GM accretive),” Arya said.
Here is what Micron Technology Inc (NASDAQ:MU) said about HBM during fiscal Q3 earnings call:
“Our HBM shipment ramp began in fiscal Q3, and we generated over $100 million in HBM3E revenue in the quarter, at margins accretive to DRAM and overall Company margins. We expect to generate several hundred million dollars of revenue from HBM in fiscal 2024 and multiple billions of dollars in revenue from HBM in fiscal 2025. We expect to achieve HBM market share commensurate with our overall DRAM market share sometime in calendar 2025. Our HBM is sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of our 2025 supply. We are making significant strides toward expanding our HBM customer base in calendar 2025, as we design-in our industry-leading HBM technology with major HBM customers. We have sampled our 12-high HBM3E product and expect to ramp it into high-volume production in calendar 2025 and increase in mix throughout 2025.”
ClearBridge Value Equity Strategy stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Stock selection in the IT sector proved to be the largest contributor to performance, particularly driven by the strong performance of Micron Technology, Inc. (NASDAQ:MU) The company, which designs, develops, manufactures and sells memory and storage products, continued its strong performance alongside other AI beneficiaries as the anticipated demand for new and additional storage essential for housing and training large language AI models continues to grow.”
Overall, Micron Technology Inc (NASDAQ:MU) ranks 6th on Insider Monkey’s list titled Top 10 Latest AI Stock News and Analyst Ratings. While we acknowledge the potential of Micron Technology Inc (NASDAQ:MU), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.