We recently published a list of Analysts are Recommending These 10 AI Semiconductor Stocks Despite Selloff. Since Micron Technology Inc (NASDAQ:MU) ranks 4th on the list, it deserves a deeper look.
Despite the concerns around AI stock valuations, some analysts believe companies are just getting started with the AI revolution and have a long runway for this bull run. Last month Cantor Fitzgerald analysts said in a note that AI semiconductor companies were positioned well heading into the second-quarter earnings season. They also said strengths in NAND and HDD markets and fiscal discipline make data storage companies attractive.
“We continue to believe that AI-leveraged names are still the most attractive to own heading into earnings,” Cantor analysts led by C.J. Muse said.
Cantor’s analysts said that companies that make semiconductor equipment are still in the early cycle of recovery.
“We are now five quarters into the recovery versus the average typical cycle of nine quarters and believe this cycle will be even more elongated,” they said.
Deutsche Bank also expects strong performance from AI-driven semiconductor stocks in the second-quarter earnings season. However, the firm observes that investors are becoming more selective. Analyst Ross Seymore highlighted that while optimism persists around the current AI leaders, there is growing caution about which companies will sustain or begin to show financial gains amid lingering uncertainty about the momentum’s longevity.
Melissa Weathers, another Deutsche Bank analyst, noted that semiconductor stocks have surged by 10-20% or more since the beginning of the second quarter, with price-to-earnings ratios approaching or exceeding previous highs. She emphasized that future upward movement will likely depend on revisions to earnings estimates.
For this article we picked 10 AI semiconductor stocks Deutsche Bank and Cantor Fitzgerlad are bullish on. 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
Cantor is also bullish on MU.
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 recently 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, 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 4th on Insider Monkey’s list Analysts are Recommending These 10 AI Semiconductor Stocks Despite Selloff. 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.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
