These chip leaders have attractive AI opportunities that could significantly increase their profits.
Nvidia has become everyone's favorite artificial intelligence (AI) stock, but there are other ways to bet on AI without chasing the rapidly rising GPU leader.
intel (INTC -2.57%) and micron technology (MU -0.41%) As the semiconductor industry emerges from the slump of the past few years, we are starting to see improvement in growth. These top chip stocks have hit new highs this year, but their valuations still have room to rise further.
1. Intel
Inter has found itself venturing into uncharted territory in recent years. Advanced Micro Devices Its lead in the chip market is slowly being eroded, and the company is falling behind in the data center as organizations adopt more powerful GPUs to train AI models. But Inter is fighting back. The company's improving financial performance has pushed its stock price higher, but it has more room to operate in the coming years.
The recovery in the semiconductor industry is good news for Intel, as Intel's chips are still in more than 60% of computers. Intel's revenue grew 10% year over year in Q4 2023 and is expected to continue growing as the PC market recovers.
Intel's Client Computing Group reported a 33% year-over-year revenue increase in the fourth quarter. This growth follows the launch of Intel Core Ultra mobile processors designed to deliver new AI experiences to PC users.
AI PC is a huge growth opportunity. microsoft has begun rolling out its generative AI assistant Copilot for enterprise customers, and widespread rollout to individual consumers could be a key catalyst for the long-term expansion of Intel's client computing group .
Intel expects AI-based PCs to account for 80% of the PC market by 2028. If that prediction holds true, the company's recent success with its Core Ultra releases suggests that it still has the power to maintain and claw back its lead in the CPU market. Billions of dollars in new revenue.
Wall Street analysts expect Intel's earnings per share to reach $2.96 by 2026. If the stock were trading at a multiple of 25 times market earnings, the stock could be worth $74, which would be a 68% increase over the prior period. Current price.That should be enough to outperform it. S&P500 index.
2. Micron Technology
AI training requires more than just advanced processors. Enterprises are also increasing their investments in high-bandwidth memory and solid-state storage solutions to handle large-scale data workloads. This puts Micron Technology in an excellent position for growth.
Micron posted a 23% revenue increase last quarter, and that's just the beginning. The company suffered a slump last year, but revenues are starting to accelerate ahead of a multi-year opportunity for management to serve the AI market.
Micron's high-bandwidth memory products are already sold out for 2024, and the majority of 2025 products have already been allocated.
The company is one of the leading suppliers of dynamic random access memory (DRAM) modules for computers, so it should also benefit from the introduction of AI-based PCs. Management also expects AI-based phones to require more memory content per unit, which will be a driving factor.
Management expects memory selling prices to rise this year, leading to record profits in fiscal 2025.
Wall Street analysts expect Micron's earnings per share to reach $10.05 over the next few years. Applying Micron's historical average P/E ratio of 23x, the company's stock could be worth $230 by 2026. That's nearly 80% above the current stock price, and more than enough to beat the average annual return of the S&P 500.
John Ballard holds positions at Advanced Micro Devices and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, and his Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 call on Intel, Long January 2025 $45 call on Intel, Long January 2026 $395 call on Microsoft, Short January 2026 $405 call on Microsoft. call, and a May 2024 $47 short call. Intel. The Motley Fool has a disclosure policy.
