We recently published a list of top 10 most buzzing AI semiconductor stocks in 2024. Since Micron ranks higher in the list, it needs a deeper look. But first, let’s see what’s happening in the semiconductor industry with a special focus on AI.
The semiconductor industry seems have found a new growth catalyst in the form of AI that could keep it thriving and abuzz for years to come, as analysts see no end in sight for the demand for AI-specific chips needed to power generative AI applications that would be ubiquitous from just a few years from now. Earlier this month, analysts at Citi published a bullish note for semiconductor stocks, citing strong March sales, which jumped about 15.7% year over year to total $50.6 billion. The figure was higher than Citi’s $50.1 billion estimate. Citi analyst Christopher Danely highlighted that most of the demand bump came from analog and microcontrollers, which were up about 50% on a month-over-month basis.
Are AI Semiconductor Stocks Overvalued?
Semiconductor stocks have run so much on the back of the AI boom that many are voicing valuation concerns. And it’s always surprising when such concerns come from Cathie Wood, one of the notable growth investors of this age who poured (and lost) a fortune into hyper-growth stocks trading at eye-popping valuations. In March, Cathie Wood warned that the semiconductor space could see a “correction.” However, Wood clarified that she’s just expecting a “correction” and not an “end” of the sector.
Since the end of March, VanEck Semiconductor ETF (NASDAQ:SMH) is up 10%.
But Cathie Wood isn’t alone in these valuation worries. Analysts believe since the AI-rally is no longer limited to big names like NVIDIA Corp (NASDAQ:NVDA) and MSFT, investors should caste a wider net. And we did just that. Our latest research unlocked many AI-related stocks trading at attractive valuations. If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
A robotic arm holding a semiconductor chip, emphasizing the precision and quality of the company’s production equipment.
For this article we used stock screeners and did manual research to see which AI-related semiconductor stocks were generating the most buzz. From these stocks we chose the ones with the highest number of hedge fund investors and strong YTD gains. 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).
Micron Technology Inc (NASDAQ:MU)
YTD Price Performance: +60%
Earlier this month, Citi reiterated that Micron Technology Inc (NASDAQ:MU) remains its top pick in the semiconductor industry. The investment firm was commenting on latest data from the Semiconductor Industry Association that showed March sales in the semiconductor industry jumped about 15.7% on a YoY basis to $50.6 billion.
Citi’s Christopher Danely said this data shows “analog inventory replenishment in 2H24, and we remain bullish on the group.”
Sequoia Fund stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its fourth quarter 2023 investor letter:
“Exits last year included Netflix, Bank of America and Micron Technology, Inc. (NASDAQ:MU). As discussed in our Q2 shareholder letter, we exited Micron after the rationale for our investment was strained by rising geopolitical tensions, which have increased investment risks in the high-performance semiconductor industry. These risks are bearable, but we felt it prudent to reduce the portfolio’s exposure to them. We think both Bank of America and Micron were purchased at conservative prices given the facts at hand, but the facts changed and we moved on.”
Micron Technology Inc (NASDAQ:MU) ranks 2nd in Insider Monkey’s list of the 10 Buzzing AI Semiconductor Stocks in 2024.
If you are looking for an AI stock that is as promising as Microsoft 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.