NVDA - Is Micron stock warming up to be the next Nvidia?

2024-04-04 06:26:40 ET

Micron Technology Inc (NASDAQ: MU) has more than doubled over the trailing twelve months. But does it have what it takes to be the next Nvidia Corp (NASDAQ: NVDA) for investors?

Let’s explore.

What makes Micron stock worth owning in 2024?

Micron is one of the world’s largest producers of DRAM and NAND.

In fact, its memory chips are more power-efficient than SK Hynix and Samsung – two of its largest global competitors. This is what makes products more attractive for higher-end servers, mobile devices, and personal computers.

Wall Street expects the chipmaker to grow its revenue by a whopping 56% this year and another 43% in 2025.

The bullish view is related to an expected recovery in the smartphone and PC market . The Nasdaq listed firm is also projected to win more business from automotive, industrial, and enterprise customers this year now that macro headwinds are subsiding.

Not to mention the continued focus on artificial intelligence is a material positive catalyst for Micron as well. Sanjay Mehrotra – its chief executive is convinced the global market for memory chips is only in “the very early innings of multiyear growth phase driven by AI” ( read more ).

The AI based smartphones, he said in a recent conference call, could “carry 50% to 100% greater DRAM content compared to non-AI flagship phones today”.

Note that Micron stock could roughly quadruple over the next five years if it manages to grow sales at a compound annualised rate of 30% moving forward.

Here’s why may not be the next Nvidia

Evidently, Micron Technology Inc is an exciting investment for those interested in the semiconductor exposure. But there are a few key differences that suggest it may not replicate what Nvidia has delivered since before the pandemic.

Unlike Nvidia, produces its chips at its own foundries which makes its business a capital intensive one. Putting it simply, the $142 billion company based out of Boise, Idaho is significantly lower margins than .

Secondly, while Nvidia pretty much owns its core markets – Micron is only the world’s 3 ^rd largest producer of DRAM chips and 5 ^th largest for NAND chips.

Then, of course, the memory chips maker does not have the same pricing power as Nvidia and its products cost significantly less in the first place as well. Lastly, Micron shares expose you to the risk of cyclical downturns as well.

These differences suggest that Micron stock will likely not be the next Nvidia.

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