Forget Nvidia: Another Super Semiconductor Stock Just Hit a Record High, with Time to Buy (Part-2)

Micron is profitable again. Micron's revenue fell 50% in fiscal 2023 (ending Aug. 31, 2023), resulting in a $5.8 billion deficit. Due to pandemic-related supply difficulties, the chip industry overproduced, causing an inventory glut and falling prices.

Micron is past that. Revenue rose in the fiscal 2024 first quarter (ending Nov. 30, 2023), yet the corporation lost almost $1.2 billion. But the company's fiscal 2024 second quarter (ending Feb. 29, 2024) was a breakout. Micron's revenue rose 57% year-over-year to $5.8 billion, beating the company's target of $5.3 billion. Additionally, it earned $793 million, a welcome return to profitability.

CEO Sanjay Mehrotra attributed the excellent quarter to a tightening supply-demand balance, which boosted prices across all markets. He acknowledged the strength of AI server (data center) demand. Micron expects fiscal 2024 third-quarter revenue of $6.6 billion, up 76% from the year-ago period. From the second quarter, growth would accelerate significantly.

A digital image of a chip-centered circuit board. Why you should buy Micron stock despite its record high. Investors can't evaluate Micron's stock using the P/E ratio because it lost money until Q2. Micron stock has a price-to-sales (P/S) ratio of 6.7 based on its trailing-12-month revenue of $18.3 billion and market capitalization of $122 billion.

This is far cheaper than Nvidia stock, which trades at 37 P/S, or Advanced Micro Devices stock, which trades at 12.9. These names deserve a premium since their GPU, CPU, and NPU work is unmatched and drives Micron's product demand.

AI is estimated to add $7 trillion to $200 trillion to the global economy over the next decade, and Micron's hardware is vital to unlocking that value. 

In order to accelerate innovation, the business is sampling its 12-high HBM3E data center solution, which improves DRAM capacity by 50%. That allows Nvidia to put more memory into each GPU, speeding training and inferencing and enabling more complex AI models.

With Micron's sales growth accelerating, its all-time high stock price shouldn't dissuade investors, especially given its valuation and future potential.

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