SSNLF - Micron Is Not A Bargain Despite The AI-Driven HBM Sensation

2024-06-06 17:07:43 ET

Summary

• As one of the few suppliers of HBM3E critical to accelerator chips, Micron has been a key beneficiary of AI momentum over the past year.
• Nvidia's latest commitment to upgrading its AI technology annually, with the announcement of Rubin based on HBM4, further reinforces revenue visibility for Micron, alleviating its inherently elevated cyclical risk exposure.
• The following analysis will dive into Micron's HBM advantage in the AI-first era, and includes a sensitivity exercise to gauge the durability of the stock's valuation at current levels.

Micron ( MU ) has been a key beneficiary of ongoing AI momentum, as its HBM technology continues to play a critical role in chips that underpin the transition to accelerated computing. The stock has more than doubled since the advent of OpenAI’s ChatGPT, outpacing previous losses due to the extended cyclical downturn in consumer-facing end markets.

Nvidia’s ( NVDA ) latest introduction of the next-generation Rubin AI platform provides further reinforcement to this secular tailwind for Micron. Specifically, Micron’s product roadmap already considers next-generation HBM4 technology, which management expects to start volume shipments around the same timeline as the Nvidia Rubin platform’s go-to-market. This will be key to reinforcing revenue visibility for Micron, compensating for the company’s inherently elevated exposure to cyclical risks in the consumer-facing memory market....

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