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Nowadays, when Nvidia (NVDA) makes an announcement, the whole investing world sits up and takes notice. The Santa Clara-based chip designer has become almost synonymous with the booming artificial intelligence (AI) industry globally. So, naturally, all eyes were on the company's GTC AI conference last month, where the company provided a roadmap for its future.
One high-profile announcement from the event was the reveal of the company's new Blackwell B200 chip, which is built specifically to enhance AI operations and tools. Touted to be more efficient than its Hopper GPUs, Nvidia CEO Jensen Huang said that each Blackwell GPU will cost between $30,000 and $40,000.
Goldman Sachs (GS) analysts think that Nvidia's new chip will be a rising tide that lifts more than one boat in the semiconductor industry. They expect the market for high-bandwidth memory (HBM) chips will surge by 10x, from $2.3 billion in 2022 to $23 billion by 2026. Here's a closer look at one stock Goldman expects to benefit.
About Micron Technology Stock
Founded in 1978, Micron Technology (MU) is a leading manufacturer of innovative memory and storage solutions. The Boise-based company's offerings include DRAM (Dynamic Random-Access Memory), NAND Flash memory, solid-state drives (SSDs), and other memory and storage products. With access to a wide market, the company's market cap currently stands at $141.7 billion.
Micron stock has rallied 46.3% so far this year, easily outperforming the broader market. It also offers a dividend yield of 0.47%.
Micron's Big Earnings Beat
Nvidia's new chip isn't the only good news Micron has going for it. In its latest earnings results for Q2 2024, Micron's numbers beat the Street on both earnings and revenue.
Revenues for the quarter came in at $5.8 billion, marking an impressive yearly rise of 57.7%. Micron reported EPS of $0.42 for the period, much improved from a loss of $1.91 per share in the year-ago quarter. That comfortably topped the Street estimate for a loss of $0.25 per share. Notably, the company's bottom line has come in better than the consensus estimate in four out of the past five quarters.
The company exited the quarter with a cash balance of about $8 billion, much higher than its short-term debt levels of $344 million. Further, for the six months ended Feb. 29, Micron's net cash from operating activities jumped to $2.6 billion, more than double the prior year's $1.3 billion.
How AI is Driving Growth at Micron
Increased AI infrastructure and growth in data centers are expected to be key demand enablers for Micron's advanced memory and storage. According to UBS, AI infrastructure spending is expected to grow at a CAGR of 38% until 2027.
As a result, a key driver of Micron's growth is expected to be from its more efficient higher silicon-content chips, the HBM3E, across data center servers. This chip reduces power demand by 30% with higher capacity rates. This higher-performance storage chip will be utilized in Nvidia’s Blackwell GPU, which has a 33% higher HBM attach rate.
Further, Micron remains a major player in the DRAM and NAND markets, with shares of 22.8% and 10.3%, respectively. And both of those markets are set for continued growth, with the DRAM market expected to reach a valuation of $126.23 billion in 2031 (from $96.99 billion in 2022) and the NAND market forecasted to reach $117 billion (from $67 billion in 2021). To support this growth, Micron has earmarked an investment of $150 billion in manufacturing and R&D over the next decade.
What's the Analyst Forecast for MU Stock?
Analysts have an average rating of “Strong Buy” for the stock, with a mean target price of $124.38. That's nearly flat with Micron's current share price, although the Street-high target price of $225 indicates an upside potential of about 80.9% from current levels.
Out of 28 analysts covering the stock, 24 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, 1 has a “Hold” rating, and 1 has a “Moderate Sell” rating.
