The semiconductor industry is growing rapidly, driven by extensive chip usage in various end-use applications like electronics, industrial equipment, and automotive. The industry’s expansion is further fueled by the proliferation of generative AI, IoT, 5G, and autonomous vehicles, increasing demand for advanced chipsets and integrated circuits (ICs).
According to a Precedence Research report, the global semiconductor market is expected to grow at a CAGR of 7.6%, with the market size resulting in $1.14 trillion by 2033.
Moreover, the Semiconductor Industry Association (SIA) announced that global semiconductor industry sales totaled $46.20 billion in February 2024, up 16.3% from $39.70 billion in February 2023. Also, investors’ interest in chip stocks is evident from the SPDR S&P Semiconductor ETF’s (XSD) 19.5% returns over the past six months.
Given this backdrop, let’s compare two Semiconductor & Wireless Chip stocks, NVIDIA Corporation (NVDA) and Micron Technology, Inc. (MU), to understand which stock will boost your returns in May.
The Case for NVIDIA Corporation Stock
NVIDIA Corporation (NVDA) provides graphics & compute and networking solutions internationally. Its Compute & Networking segment entails a data center accelerated computing platform, automotive AI cockpit, and advanced networking, and the Graphics segment offers GeForce GPUs for gaming, PC, gaming platform solutions, and more.
NVDA’s stock has declined 12.6% over the past month but gained 91.8% over the past six months to close the last trading session at $824.23.
On March 18, 2024, NVDA unveiled a 6G research platform that empowers researchers with a novel approach to develop the next phase of wireless technology. The NVIDIA 6G Research Cloud platform is open, flexible, and interconnected, offering researchers a comprehensive suite to advance AI for radio access network technology.
Ansys, Arm, Keysight, Nokia, Samsung, ETH Zurich, Rohde & Schwarz are among the first adopters of NVIDIA Aerial Omniverse Digital Twin, Aerial CUDA-Accelerated RAN, and Sionna Neural Radio Framework to help realize the future of telecommunications.
On March 18, NVDA collaborated with SAP SE (SAP) to focus on accelerating enterprise customers' ability to harness the transformative power of data and generative AI across SAP's portfolio of cloud solutions and applications.
NVIDIA and SAP plan to partner to integrate generative AI into cloud solutions from SAP, which include the latest release of the SAP Datasphere® solution, SAP Business Technology Platform®, and RISE with SAP®. This strategic partnership should bode well for the companies.
In terms of forward EV/EBITDA, NVDA is trading at 27.08x, 93.4% higher than the industry average of 14x. Also, the stock’s forward EV/Sales of 17.38x is 532.5% higher than the industry average of 2.75x. However, its forward non-GAAP PEG of 0.91x is 49.5% higher than the 1.79x industry average
NVDA’s trailing-12-month gross profit margin of 72.72% is 49.4% higher than the industry average of 48.50%. Moreover, the stock’s trailing-12-month EBIT margin and EBITDA margin of 54.12% and 56.60% compared to industry averages of 4.90% and 9.50%, respectively.
In the fourth quarter that ended January 28, 2024, NVDA’s revenue increased 265.3% year-over-year to $22.10 billion. Its non-GAAP operating income rose 564.4% year-over-year to $14.75 billion. Its non-GAAP net income and non-GAAP earnings per share stood at $12.84 billion and $5.16, up 491.7% and 486.4% from the prior year’s quarter, respectively.
However, the company’s current liabilities came in at $10.63 billion as of January 28, 2024, compared to $6.56 billion as of January 29, 2023.
Analysts expect NVDA’s EPS for the first quarter (ending April 2024) to increase 407.6% year-over-year to $5.53, and its revenue is expected to increase 238.3% year-over-year to $24.33 billion. Moreover, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is remarkable.
NVDA’s POWR Ratings reflect its mixed outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
NVDA has a C grade for Momentum. In the Semiconductor & Wireless Chip industry, it is ranked #20 out of 92 stocks.
To see additional POWR Ratings for Growth, Value, Stability, Sentiment, and Quality for NVDA, click here.
The Case for Micron Technology, Inc. Stock
Micron Technology, Inc. (MU) designs, develops, manufactures, and sells memory and storage products worldwide. The company operates through four segments: Compute and Networking Business Unit; Mobile Business Unit; Embedded Business Unit; and Storage Business Unit.
MU’s stock has gained 28.5% over the past six months to close the last trading session at $112.46.
On April 10, MU announced that it had qualified a full suite of its automotive-grade memory and storage solutions for Qualcomm Technologies Inc.’s Snapdragon Digital Chassis, a comprehensive set of cloud-connected platforms designed to power data-rich, intelligent automotive services.
This work between Micron and Qualcomm Technologies is aimed at helping the ecosystem build next-generation intelligent vehicles powered by sophisticated AI.
On February 27, MU announced that Samsung had incorporated MU’s low-power double data rate 5X (LPDDR5X) memory and Universal Flash Storage (UFS) 4.0 mobile flash storage into select devices in the Samsung Galaxy S24 series, which introduces powerful AI to mobile users worldwide. This partnership would benefit both companies significantly.
In terms of forward EV/Sales, MU is trading at 5.12x, 86.2% lower than the industry average of 2.75x. Likewise, the stock’s forward EV/EBIT of 90.25x is 371.6% higher than the industry average of 19.14x. However, its forward Price/Book of 2.74x is 27.9% lower than the 3.81x industry average.
MU’s trailing-12-month EBITDA margin and CAPEX/Sales of 20% and 33.87% are significantly higher than the industry averages of 9.50% and 2.32%, respectively. However, the stock’s trailing-12-month asset turnover ratio of 0.28x is 55.3% lower than the industry average of 0.62x.
During the second quarter that ended February 29, 2024, MU’s revenue increased 9.8% year-over-year to $5.82 billion. Its gross margin stood at $1.08 billion, compared to a gross loss of $1.21 billion in the previous year’s quarter. Its net income came in at $793 million, compared to a net loss of $1.31 billion in the previous-year quarter.
Furthermore, the company’s EPS came in at $0.71, compared to a loss per share of $2.12 in the prior year’s quarter.
Analysts expect MU’s revenue for the third quarter (ending May 2024) to increase 75.6% year-over-year to $6.59 billion. The company is expected to report an EPS of $0.43 for the same quarter, compared to a year-ago loss per share of $1.43. Also, MU has an impressive earnings history as it surpassed the consensus EPS and revenue estimates in all four trailing quarters.
MU’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to a Neutral in our proprietary rating system.
The stock has a C grade for Quality, Value, and Momentum. MU is ranked #49 in the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see MU’s ratings for Growth, Stability, and Sentiment here.
Which Chip Stock Will Boost Your Returns in May: NVDA vs. MU
The semiconductor market is greatly influenced by technological advancements and innovation, increasing demand for electronics and connectivity, the emergence of new technologies like 5G, AI, and IoT, and government initiatives. Chips are integral to several industries, including automotive, consumer electronics, industrial equipment, and healthcare.
Both NVDA and MU stand to benefit from the chip industry’s tailwinds. However, given their mixed fundamentals, waiting for better entry points in these stocks could be wise now.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Semiconductor & Wireless Chip industry here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
NVDA shares rose $15.27 (+1.85%) in premarket trading Wednesday. Year-to-date, NVDA has gained 66.44%, versus a 6.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
Which Chip Stock Will Boost Your Returns in May: NVDA vs. MU StockNews.com
